Northgate plc
ANNUAL REPORT
AND ACCOUNTS
for the year ended 30 April 2017
25361.02 13-6-17 Proof Four ABOUT US
Northgate plc is the leading light commercial vehicle
hire business in the UK, Spain and Ireland by fleet size
and has been operating in the sector since 1981. Our
core business is the hire of light commercial vehicles
to businesses on a flexible and term basis, giving
customers the ability to manage their vehicle fleet
requirements without a long term commitment.
Contents
REVIEW
01 Highlights
02 Chairman’s statement
04 Q&A with the CEO
05 Why invest
STRATEGIC REPORT
08 Marketplace
10 Our strategy
12 Our business model
14 Chief Executive Officer’s review
18 Financial review
26 Key Performance Indicators
28 Managing risk
34 Corporate social responsibility
The Northgate Difference
Option of no capital
or contractual commitment
Ease of flexing number
and type of vehicles
24/7 support
Introduction to governance
GOVERNANCE
42 Board of Directors
44 Chairman’s introduction to governance
45
48 Corporate governance
51 Report of the Audit and Risk Committee
54 Remuneration report
74 Report of the Directors
77 Statement of Directors’ responsibilities
78
Independent auditor’s report to the
members of Northgate plc
FINANCIALS
86 Consolidated income statement
87 Statements of comprehensive income
88 Balance sheets
89 Cash flow statements
90 Notes to the cash flow statements
91 Statements of changes in equity
92 Notes to the accounts
124 Notice of Annual General Meeting
127 Glossary
128 Shareholder information
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG HIGHLIGHTS
UNDERLYING FINANCIAL
PBT
(£m)
Net debt
(£m)
85.0
82.9
75.0
362.7
346.1
60.3
49.5
327.8
309.9
309.9
OPERATIONAL
Vehicles on Hire
Closing
UK
(’000)
42.4
Spain
(’000)
37.7
39.5
35.7
Ireland
(’000)
3.5
3.3
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
2016
2017
2016
2017
2016
2017
About our non-GAAP measures and why we use them
Throughout this report we refer to underlying results and measures. The underlying measures allow
management and other stakeholders to better compare the performance of the Group between the
current and prior period without the effects of one-off or non-operational items.
Underlying measures exclude certain one-off items such as those arising due to restructuring activities and
recurring non-operational items, including certain intangible amortisation.
Exceptional items are explained on page 115 and Reconciliations of GAAP to non-GAAP measures are
included on page 25.
Navigating the Report
For further information within this
document and relevant page numbers
Additional information online
01
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWREVIEW CHAIRMAN’S
STATEMENT
Our core objective is to grow
shareholder value and we
will do this by developing a business
capable of delivering long term,
sustainable and growing cash flows,
achieved through a disciplined
approach to deployment of capital
and a rigorous focus on execution.
ANDREW PAGE I CHAIRMAN
Dividend
The Group remains in a strong financial
position, with healthy cash generation and
a robust balance sheet. This underpins our
progressive dividend policy and the Board’s
continued confidence in the outlook for
the Group means we are proposing a full
year dividend of 17.3p, an increase of 8%
compared to the 2016 full year dividend of
16.0p. This means a final proposed dividend
of 11.6p (2016 – 10.9p).
This gives a full year dividend cover of 2.7x
on underlying earnings, in line with our
intention to keep cover in the range of
3.75x to 2.5x.
Board changes
During the year we appointed Kevin
Bradshaw as our Group CEO. Kevin
has a background in both B2B and B2C
organisations and he has a strong track
record of developing businesses through
clear strategic direction with a focus on
consistent execution. He previously led Avis
UK and, more recently, was CEO of Wyevale
Garden Centres, with both businesses
enjoying strong profitable growth under
his leadership.
2017 has proved a challenging year for
Northgate with a number of factors
impacting the Group’s performance.
During the year it became increasingly
clear that, notwithstanding the competitive
environment within which Northgate
operates, there are significant opportunities
for our business which need to be developed
in a consistent and focused manner.
Performance
The Group’s underlying profit before tax was
£75m which represented a 10% decline on
the previous year’s £83m. The performance
of our UK business was disappointing with
underlying operating profits declining by
£11.5m which represented a fall of 21% on
the prior year. We have taken a number of
actions to address this and these are set out
in detail in the CEO’s report. Our Spanish
and Irish businesses performed well and
continue to make excellent progress with
good growth in vehicles on hire (“VOH”)
and with the potential for further growth
in VOH, revenues and profits. VOH grew
by 2,200 in Spain and Ireland; in the UK
there was a decline of 2,900 which was
particularly disappointing as we had
anticipated a steadily improving pick up
during the second half of the year.
Cash generation was strong with free cash
flow of £43m. This provides good scope
to further expand our business, including
our move into term hire, and also to return
cash to our shareholders in the form of
increasing dividends.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Our people
I would like to record the Board’s thanks to
all of our 2,900 team members throughout
Northgate. They are the people who, day in
and day out, make sure that our customers
receive a superb service and we are most
grateful to them.
Outlook
Northgate is, fundamentally, a very good
business with a superb group of people
and an infrastructure capable of supporting
significant growth. With strong leadership,
clear strategic direction and a clear sense of
purpose I believe that much can be achieved.
The current year has started encouragingly,
with some exciting prospects in the pipeline,
and our team will be working hard to deliver
an improved performance.
Andrew Page
Chairman
The way forward
Our core objective is to grow shareholder
value and we will do this by developing a
business capable of delivering long term,
sustainable and growing cash flows,
achieved through a disciplined approach to
deployment of capital and a rigorous focus
on execution. Our touchstones will be cash
flow and returns on investment.
There is significant potential for Northgate
with opportunities to develop the business
and grow revenues and profits. In several
areas of our business we need to do better,
with consistent and effective day to day
execution. There is good demand for our
product and services and we intend to
harness this effectively through marketing
clear customer propositions and ensuring we
meet or exceed our customers’ expectations.
There are also previously untapped market
segments which we have the infrastructure
and skill set to service and I am pleased to
report that we are already starting to gain
good traction in the term hire segment.
Under Kevin’s leadership, we anticipate a
significant uptick in pace, sharper focus on
consistent execution and improved strategic
direction. There is much to do at Northgate
and significant opportunity to grow our
businesses in the UK, Spain and Ireland.
0302
25361.02 13-6-17 Proof FourREVIEWREVIEW Q&A WITH
THE CEO
Kevin Bradshaw
Northgateplc.com stock code: NTG
What are the three key things you
have learned in your first five months
with Northgate?
KB My first impressions on joining are that Northgate is a
fundamentally good, well positioned business, with great
people that have a real desire to serve our customers well
and in turn deliver strong returns for our shareholders.
There is however, work to be done and I am excited by the
challenges that lie ahead.
What is your vision for the Group
over the medium term?
KB Over the first five months I have managed to spend
time across our network with people working in all areas
of the business. I believe that the potential for Northgate is
very significant and that we are a business that is capable
of delivering good long term growth in cash flows with
returns well ahead of our cost of capital. The strategic review
on pages 6 to 39 highlights four key growth priorities to
deliver these returns. The first area that needs attention is, of
course, the UK business and I have already started to address
this with self-help actions and leadership changes.
What have been the reasons for the
reduction in vehicles on hire in the UK?
KB Competition has certainly intensified but our market
research concludes that the rental market has grown by
c.6% a year over the last three years. Reductions in vehicles
on hire in our business have been broad-based across the
range of customer sizes, industry sectors and geography.
Some critical key weaknesses have persisted in the execution
of our sales and marketing efforts and I have put in measures
to address these going forward.
What are your key sustainability
priorities over the medium term?
KB We constantly strive to reduce environmental impacts
to ensure we are building a sustainable business. Over the
medium term I will encourage further initiatives around
energy usage and waste management to ensure we continue
to progress.
Read more in our Corporate social responsibility report on page 34
How do you envisage Brexit
impacting the Group?
KB It is currently unclear what, if any, impact Brexit will
have on the Group. Economic growth will drive demand
and on the other hand our flexible product lends itself well
to periods of uncertainty. Under any scenario the Group
has a secure funding base and robust balance sheet which
underpins our confidence for the future.
25361.02 13-6-17 Proof Four WHY INVEST
As a new investor why should I invest in Northgate?
THE NORTHGATE
INVESTMENT STORY
We believe that Northgate is
a sound investment proposal
that will return value to
shareholders. Over recent
years the Group has delivered
a combination of earnings
growth, cash generation and
dividend growth.
5yr EPS history chart (p)
5yr Gearing history (%)
51.0
49.0
47.3
102
35.1
29.2
91
81
67
61
5yr Net tangible asset
value per share (p)
5yr Dividend history (p)
314
287
267
383
348
17.3
16.0
14.5
10.0
7.3
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
Financial profile
| Our business is highly cash generative.
After taking into account the impact
of adjusting the fleet size, the Group
generated £44m of underlying free cash
flow in the year.
| We have a progressive dividend policy with
dividend growth of 8% in the year set
within a cover range of 3.75x to 2.5x in the
medium term.
| We have a strong balance sheet at 61%
geared and £260m of spare facility to
enable future growth.
| Underlying EPS has improved over the
last five years from 29.2p in 2013 to 47.3p
in 2017.
Market opportunity
| Northgate is the market leading provider of light commercial vehicle flexible rental in
the UK, Spain and Ireland and has been operating in this sector since 1981.
Read more in our Marketplace section on page 8
| The potential for growth is vast with eight million light commercial vehicles driving
on the roads in the UK, Spain and Ireland.
Read more in our Marketplace section on page 8
| Our strategy is focused around maximising the opportunity to grow in our core
markets and to expand our offer so that its appeal crosses over to the adjacent light
commercial vehicle markets. High levels of customer service are at the heart of
what we do, and our measure of customer satisfaction (NPS) has improved from
23% to 41% over the last three years across the Group.
Read more in our Strategy section on page 10
Risk management
We take a conservative view with respect to
risk management. Our robust approach to
risk management enables us to continually
identify and assess risks to the business.
Our business model enables us to respond
to changes in demand and conserve
cash through reducing vehicle purchases,
disposing of liquid vehicle assets or ageing
out our existing fleet.
Read more in our Managing risk section
on page 28
0504
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWREVIEW
STRATEGIC
REPORT
25361.02 13-6-17 Proof Four This section outlines our strategic objectives. The CEO and CFO
provide commentary on the Group’s operational and financial
performance in the year. We explain how we are performing
against our Key Performance Indicators and set out the principal
risks to the business as part of an overall review of our risk
management procedures. Finally, we outline how the Group is
managing its responsibilities to all of its stakeholders.
08 Marketplace
10 Our strategy
12 Our business model
14 Chief Executive Officer’s review
18 Financial review
26 Key Performance Indicators
28 Managing risk
34 Corporate social responsibility
25361.02 13-6-17 Proof Four
06
REVIEW 07
STRATEGIC
REPORT
MARKETPLACE
An overview of the size of the LCV market
in each of the Group’s three territories is
as follows:
LCVs
4.2m
LCVs
3.6m
LCVs
0.3m
LCVs
8.1m
LCVs
Owned (new)
Owned (used)
Contract hired
Rental
Total
Northgate fleet
at 30 April 2017
(‘000)
UK
Spain
Ireland
Group
No.
(m)
2.2
1.4
0.4
0.2
4.2
%
52
35
9
4
100
No.
(m)
2.6
0.8
0.1
0.1
3.6
No.
(‘000)
133
157
21
12
323
%
74
21
4
1
100
%
41
49
6
4
100
No.
(m)
4.9
2.4
0.5
0.3
8.1
%
61
29
7
3
100
46.4
41.8
3.9
92.1
SOURCE: Based on research conducted by OC&C using data from MSI, BVRLA, DFT, SIMI.
Market defined as LCVs only.
25361.02 13-6-17 Proof Four The key characteristics of each major segment are outlined below:
CHARACTERISTICS
Acquisition
(new)
Long term commitment requiring availability of up-front capital or financing. Operators bear the full risk of operating
the vehicle and funding running costs.
The purchaser takes the risk of the residual value of the vehicle.
Can be the cheapest headline cost, but overall holding cost can be higher if vehicles are not utilised or vehicle failure
leads to a significant cost of business interruption.
TYPICAL COMPETITORS
Franchised dealers.
Contract hire
Long term contractual commitment (typically a minimum of 36 months).
Penalties for early return of vehicles and excess mileage usage.
Varying levels of operational support offered at additional cost.
Large companies often backed by financial
institutions.
Flexible rental
No contractual or capital commitment coupled with operational flexibility and fleet management support.
Vehicles are usually supplied fully inclusive of maintenance and without penalty for excess mileage.
Some national companies but predominantly
small regional operators.
Daily rental
Acquisition
(secondary
market)
Flexible, satisfying short term requirements at short notice, normally the highest headline cost as a result.
Typically sold directly to owner managed businesses who may have capital constraints.
A combination of large multinationals down to
small local operators.
Franchised dealers and some national retailers
down to small local operators and individual
traders.
Auction houses selling directly to the trade.
We have no individual sector focus – our customer portfolio broadly mirrors the wider
economy (excluding professional services).
The annual growth rate (AGR) of the market over the last three years has been as follows:
Owned – new
Owned – used
Contract hired
Rental
Northgate*
GDP growth#
UK
%
4
2
9
6
(5)
2.4
Spain
%
(1)
(1)
4
1
3
(2.9)
Ireland
%
4
4
4
11
20
5.8
SOURCE: Based on research conducted by OC&C using data from MSI, BVRLA, DFT, SIMI.
* Comparing April 2014 to April 2017.
# Calendar year 2013 to 2016 other than for Ireland which compares calendar year 2013 to calendar year
2015 due to availability of data.
08
09
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWSTRATEGIC REPORT OUR STRATEGY
GROWTH OPPORTUNITIES
Northgateplc.com stock code: NTG
CAPABILITIES
FLEXIBLE
SHARE
GAIN
FIXED
TERM SHARE
GAIN
GROWTH OPPORTUNITIES
FIXED
TERM
(SUBSTITUTE
OWNED)
VEHICLE
SALES
Brand
Digital
NORTHGATE VEHICLE HIRE / BROADEN/DRIVE AWARENESS / ATTRIBUTES
BRAND AWARENESS
DIGITAL CUSTOMER ACQUISITION
Product Management
INNOVATION + LAUNCH
Talent / Culture
PRICE AGILITY /
LOW COST
INNOVATE / TEST / LEARN
NETWORK
EXPANSION
STRONG COMMERCIAL ACCUMEN
Information Technology
SYSTEM EFFICIENCY AND DEVELOPMENT
25361.02 13-6-17 Proof Four Strategic linkage
Our strategy forms the basis of everything we do. Our four key areas of strategic focus link to other areas of this report as follows:
Area of strategic focus
Business model1
(BUY, MANAGE, SELL)
Key enablers
(from business model)
Key performance indicators2
Principal risks and uncertainties3
Flexible share gain
BUY, MANAGE
Employees
Fixed term share gain
BUY, MANAGE
Employees
Fixed term (substitute owned)
BUY, MANAGE
Employees
Vehicle sales
SELL
Employees
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
6
6
6
6
1
1
1
1
2
2
2
2
3
3
3
3
4
4
4
4
5
5
5
5
6
6
6
1 See page 12
2 See page 26
3 See page 28
1110
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWSTRATEGIC REPORT
25361.02 13-6-17 Proof Four OUR BUSINESS
MODEL
Our reason for
being covers
two main areas:
| To help our customers operate their
fleet in the most efficient way; and
| To provide significant returns to our
shareholders.
We achieve the first through managing
our vehicles through their life cycle and
the products that we offer. We achieve
the second through honing our business
model to generate returns through the
economic cycle.
Maintaining key relationships is vital
for the business to exist and achieve
its objectives. These relationships are
covered further in our Corporate social
responsibility report.
See pages 34 to 38
WHAT DO WE DO
TO FACILITATE THIS?
HOW DO WE
ACHIEVE THIS THROUGH
THE VEHICLE
LIFECYCLE?
We negotiate directly
with manufacturers to
ensure we offer our
customers the range of
vehicles that they need.
Purchases are balanced
against sales to optimise
the age, condition and
utilisation of vehicles.
BUY
WHY DO
WE EXIST?
To help our customers
operate their fleet in the
most efficient way.
SELL
We bring to market a
wide range of vehicles
available through one of
three disposal routes –
retail, trade and auction –
to cater for customers
who prefer to own a
proportion of their fleet.
WHAT DOES THIS LOOK LIKE
FROM A PRODUCT PERSPECTIVE?
MANAGE
Our network of branches throughout the UK, Spain and
Ireland ensure availability meets demand. We maintain
our vehicles to a high standard through our national
networks of workshops.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG WHAT ARE THE KEY FEATURES
OF THESE PRODUCTS?
HOW DO WE
ACHIEVE THIS THROUGH
THE PRODUCTS
WE OFFER?
No capital or contractual
commitment
Ease of flexing number
and type of vehicles
24/7 support
FLEXIBLE
RENTAL
WHY DO
WE EXIST?
To help our customers
operate their fleet in the
most efficient way.
VEHICLE
SALES
Retail operations in all
three territories
Trusted name with
high levels of
repeat customers
Finance and other
support packages
available
HOW DOES ALL OF THIS GENERATE
VALUE OVER THE LONGER TERM?
FIXED TERM
RENTAL
Contract lengths from 12 – 48 months
Increased commitment means lower headline price
Same levels of support as with flexible rental
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG WHAT DRIVES
THESE RETURNS?
HOW DOES THE
BUSINESS MODEL LEAD
TO SUCCESSFUL
DELIVERY?
During periods of growth
fleet size and VOH
increases
Increased VOH leads to
increased operating
profit and underlying
cash flows
Cash flows and debt
facilities allow us to
further invest in fleet
whilst continuing to
provide returns to
shareholders in excess of
our cost of capital
RENTAL
PROFITABILITY
DURING
GROWTH
WHY DO
WE EXIST?
To provide significant
returns to our
shareholders.
CASH
FLOWS
DURING
CONTRACTION
WHAT RELATIONSHIPS
UNDERPIN THIS VALUE CREATION?
During periods of
contraction we
maintain utilisation by
selling vehicles
This leads us to
generate cash
This allows us to pay
down debt whilst
continuing to provide
returns to shareholders
in excess of our cost
of capital
SIGNIFICANT RETURNS TO
SHAREHOLDERS ARE GENERATED
THROUGHOUT ECONOMIC CYCLES
AND THEREFORE OVER THE
LONG TERM
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C A P I T A L
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T A L
C A P I
SHAREHOLDERS
AND LENDERS
We regularly engage with
the shareholder and lender
community throughout the
year but particularly around
full year and half year results
announcements.
Shareholders and lenders
provide the capital we need
in order to run our business.
NORTHGATE
RELATIONSHIPS
AND
RESOURCES
VEHICLES • CUSTOMER SERVICE
REIMBURSEMENT • INSIGHT
T
N
E
M
E
S
R
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•
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E
L
C
I
H
E
V
CUSTOMERS
We pride ourselves on
delivering market leading
levels of customers service.
Our latest NPS scores were
41% across the Group.
We aim to grow this to 50%
in the medium term.
SUPPLIERS
We partner directly with LCV manufacturers and the
vehicles that they supply are a key resource for our
business. We have close working relationships with each
manufacturer and engage with them regularly –
both in annual pricing negotiations and throughout the
calendar year.
REASON FOR BEING
RELATIONSHIPS
SUPPORTING
RELATIONSHIPS
For further information on our
capital allocation strategy see the
Chairman’s statement on pages 2 to 3
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG
CHIEF
EXECUTIVE
OFFICER’S
REVIEW
I have undertaken an initial
strategic review of the Group and
it is clear that there is scope for
significant growth within both our
current and adjacent markets.
KEVIN BRADSHAW I CEO
The LCV purchase, contract hire and rental
markets together generate annual revenues
of c.£16bn across our three territories.
Today, we participate in c.£11bn of this
spanning rental, contract hire and second
hand LCV trading.
Growth in the contract hire and rental
markets has been particularly strong driven
and is driven by three factors:
| First, by a cultural shift away from asset
ownership, as customers feel less need to
own vehicles outright;
| Second, through the attraction of a
low initial deposit followed by certainty
in ongoing cash flows afforded by
contract hire and rental models versus
a high initial cash outlay coupled with
uncertainty around the residual value
associated with outright purchase; and
| Third, by the attraction of lower ‘whole
life costs’ as third party provision of
vehicles and the management of them
results in lower overall costs for the
customer than direct ownership.
We believe that these factors are driving
a structural trend in the market that will
underpin strong growth for the contract hire
and rental sectors in the coming years.
Blending this market analysis with a review
of our relative competitive advantage in
each segment has identified four attractive
growth opportunities in areas where we
have the ability to win.
Group
Since joining Northgate in January 2017 I
have been impressed by the professionalism
and hardworking attitude of all our team
members. Northgate’s business model and
market position is robust and we are well
positioned to take advantage of significant
growth opportunities that exist.
I have undertaken an initial strategic review
of the Group and it is clear that there is
scope for significant growth within both our
current and adjacent markets.
Today, we operate in territories with eight
million LCVs that are supplied to customers
via three fulfilment models: ‘ownership’
where the vehicle is purchased; ‘contract
hire’ where the vehicle is hired for a
committed term, typically of several years
and ‘rental’ where the vehicle is hired and
can be returned at will.
Market
revenue
£bn
Growth
2013-2016
% CAGR
7.4
1.9%
0.8%
8.1%
5.8%
1.7%
5.0
2.0
1.1
15.5
10.3
4.6
0.6
15.5
Ownership –
bought from used
Ownership –
bought from new
Contract hire
Rental
Total
UK
Spain
Ireland
Total
Based on research conducted by OC&C using data
from MSI, BVRLA, DFT, SIMI. Used vehicle
transactions reflect primary transactions only.
Market defined as LCV only.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG 1. Defend and grow share of flexible
3. Converting ownership model to
rental markets
fixed term rental
We have prioritised defence and growth
of our position in flexible rental. In a £1bn
market with volumes growing at 6% per
annum and with an overall volume share of
31%, we see continued opportunity to build
on our leadership position here and deliver
further strong profitable growth.
2. Gain share in fixed term markets
We see a significant opportunity to grow our
share of the contract hire market. At £2bn
in market revenue, with volumes growing at
8% per annum and both EBIT margins and
return on capital similar to that of flexible
rental, we see an outstanding opportunity
to grow from a position of low market share
today. We see this as a natural adjacency
requiring limited variations in our operating
model to serve it and with substantial
opportunities to cross sell within our existing
customer base.
We see large untapped potential in
converting customer fulfilment from
‘ownership’ to ‘contract hire’ instead.
With c.£12bn in sales from 1.2m annual
transactions in new and second hand LCV
trading in our territories, we believe that
attractive EBIT margins are achievable from
sales volumes that are converted to term
hire. Each year, 450,000 of these sales
transactions are financed at the point of sale
and present a priority to target with a term
hire alternative. We see significant tailwinds
supporting this conversion as a result of the
structural market trends identified.
4. Consolidating a fragmented UK
used LCV resale market
We see a substantial opportunity to
consolidate the highly fragmented second
hand LCV trading market in the UK. In a
£5bn market, Northgate has just 2.5%
market share through Van Monster. We
believe Van Monster has significant potential
and is currently under exploited. We see
several opportunities to increase the supply
of stock to Van Monster, and to drive
significant digital and network expansion
of the business. While this market currently
operates on thinner EBIT margins, very high
asset turn ensures that strong returns on
capital are delivered.
1514
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWSTRATEGIC REPORT Northgateplc.com stock code: NTG
CHIEF
EXECUTIVE
OFFICER’S
REVIEW
CONTINUED
25361.02 13-6-17 Proof Four UK
Underlying operating profit for the year was £43.9m
compared to £55.4m in the prior year. This was mainly
attributable to 6% lower average vehicles on hire. Closing
vehicles on hire were 39,500, a reduction of 2,900 since
April 2016.
Closing vehicles on hire
growth (reduction)
Year ended 30 April 2017
Year ended 30 April 2016
H1
100
(1,300)
H2
(3,000)
(2,000)
Total
(2,900)
(3,300)
This marks a disappointing second half performance in the
UK following growth in the first six months of the year.
Whilst the first half peak reflected some seasonal business,
we expected the recovery in the final quarter to be stronger
than was experienced.
Some key weaknesses have persisted which have contributed
to this performance, namely:
| Leadership: aligning business priorities to the changing
dynamics of the market;
| Marketing: insufficient lead generation, digital innovation
and customer data acquisition;
| Sales: insufficient time in front of customers, price
inflexibility and conversion of opportunities;
| Talent: fragmented leadership and insufficient access to
strong commercial talent; and
| IT: legacy systems are inflexible, not supporting required
changes.
A number of self-help actions have already been taken to fix
these weaknesses:
| New leadership appointments in the UK executive team
to Managing Director, Sales Director and Marketing
Director roles;
| Tactical changes in sales and marketing, introducing
enhanced pricing flexibility and re-directing spend in lead
generation through telesales and digital channels;
| Formation of a small commercial centre in Reading
in order to access a wider talent pool and work
collaboratively; and
| Replacement of core IT systems is underway.
These changes will start to have an impact in the new
financial year and are crucial to the future success of the
business; they will continue to form the foundation of the
Group’s strategic priorities.
All investments made will be self-funded through the
delivery of business wide efficiencies and improved agility to
drive growth.
Spain
Underlying operating profit for the year was £42.6m
compared to £41.3m in the prior year. On a constant
currency basis, operating profit decreased by £4.2m
compared to the prior year. This included a £1.6m impact
of depreciation rate changes, a £1.2m increase in bad debts
due to trading difficulties of three large customers and a
£0.7m increase in fleet insurance due to legislative changes.
The remaining difference was due to managing a younger
fleet and dealing with a higher level of transactional churn
within flexible rental.
Closing vehicles on hire
growth
Year ended 30 April 2017
Year ended 30 April 2016
H1
500
100
H2
1,500
–
Total
2,000
100
The net growth in closing vehicles on hire of 2,000 vehicles
includes a 1,900 reduction from the run out of legacy fixed
term contracts. Of the underlying growth, 800 related to
flexible contracts and 3,100 related to vehicles put on new
fixed term contracts since the product was launched earlier
in the year.
The growth in flexible rental was held back by the ongoing
uncertainties in the political arena as the Central Government
budget approval was deferred. The successful launch of our
fixed term offer is very encouraging and this momentum has
been carried through into the new financial year.
Ireland
Underlying operating profit for the year was £3.2m
compared to £2.8m in the prior year. On a constant currency
basis operating profit was £0.1m higher than the prior year.
The growth in average vehicles on hire of 11% did not drop
through to the bottom line due to the challenge of operating
a national fleet from our Dublin hub. Ireland has experienced
significant growth in the last five years but this has been
partly achieved in regional areas which are not currently
supported by internal workshops and other operations.
Investments will now be made in the infrastructure of the
business to provide a platform for future profitable growth.
Fixed term rental
Since the launch of the new fixed term offer in the year
3,500 vehicles have been put on hire as follows:
s
t
c
a
r
t
n
o
C
d
e
n
g
i
s
)
H
O
V
(
t
a
H
O
V
l
i
r
p
A
0
3
7
1
0
2
Spain
UK
Ireland
3,847 3,130
269
62
269
62
s
r
e
m
o
t
s
u
c
w
e
N
928
17
11
s
r
e
m
o
t
s
u
c
g
n
i
t
s
i
x
E
537
16
30
e
g
a
r
e
v
A
H
O
V
r
e
m
o
t
s
u
c
r
e
p
2
8
2
e
g
a
r
e
v
A
t
c
a
r
t
n
o
c
h
t
g
n
e
l
31 months
22 months
13 months
The fixed term offer was fully launched in Spain, following
a successful trial in the first half of the year. Trials in the UK
and Ireland in the second half were also successful and a full
product launch will now take place.
Group Outlook
I have confidence in the measures that have been taken to
arrest the decline in vehicles on hire in the UK. Our Spanish
business continues to trade well and, consequently, I expect
the Group to grow vehicles on hire over the course of this
current financial year.
On the basis of an initial strategic review, we have identified
four clear growth priorities in markets that are attractive
and where we believe we have the ability to win. The fixed
term opportunity is particularly exciting and we will build on
our good progress this year which saw over 4,100 vehicle
contracts signed.
As we further develop the strategies and implementation
plans for these priorities, I have significant confidence in the
prospects for Northgate over the coming years.
Closing vehicles on hire
growth (reduction)
Year ended 30 April 2017
Year ended 30 April 2016
H1
300
300
H2
(100)
–
Total
200
300
Kevin Bradshaw
Chief Executive Officer
1716
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWSTRATEGIC REPORT
FINANCIAL
REVIEW
Our objective is to build
shareholder value by
generating returns above
our cost of capital.
PADDY GALLAGHER I CFO
Group
Summary
A summary of the Group’s financial performance for 2017 with a comparison to 2016, is
shown below:
Revenue
Underlying operating profit
Underlying profit before tax
Underlying EPS
Dividend per share
Underlying free cash flow
2017
£m
667.4
84.6
75.0
47.3p
17.3p
44.0
2016
£m
618.3
94.3
82.9
49.0p
16.0p
48.4
Change
£m
49.1
(9.7)
(7.9)
(1.7)p
1.3p
(4.4)
Change
%
7.9
(10.3)
(9.6)
(3.5)
8.1
(9.0)
On a statutory basis, operating profit was
£81.5m (2016 – £90.6m) and profit before
tax was £72.2m (2016 – £77.6m). Basic
earnings per share were 45.7p (2016 –
46.1p). Net cash generated from operations,
including net capital expenditure on vehicles
for hire, was £47.8m (2016 – £73.7m).
Group revenue increased by 7.9% to
£667.4m or 2.7% at constant exchange rates.
The weakened Sterling across the year
increased profit before tax by £5.2m
compared to the prior year.
The impact of previous changes to
depreciation rates decreased underlying
Year:
30 April 2013
30 April 2014
30 April 2015
30 April 2016
30 April 2017
30 April 2018*
30 April 2019*
* Management estimates
Cumulative
impact
Group
£m
5.3
4.3
15.7
12.0
6.3
2.1
–
profit before tax by £5.7m compared to the
prior year.
Excluding both of these impacts underlying
profit before tax was £7.4m lower than the
prior year.
The accounting requirements to adjust
depreciation rates due to changes in
expectations of residual values of used
vehicles make it more difficult to identify the
underlying profit trends in our business.
The impact on operating profit since
changes were first made in the year ended
30 April 2013, including the estimated
impact on future periods is as follows:
Year-on-year impact
Group
£m
5.3
(1.0)
11.4
(3.7)
(5.7)
(4.2)
(2.1)
UK
£m
5.3
(1.0)
8.4
(5.9)
(4.1)
(2.7)
–
Spain
£m
–
–
3.0
2.2
(1.6)
(1.5)
(2.1)
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Free cash flow was £42.9m (2016 – £62.9m)
after net capital expenditure of £174.1m
(2016 – £155.5m). If the impact of increasing
or reducing the fleet size in the year is
removed from net capital expenditure in
each year, the underlying free cash flow of
the Group was £44.0m (2016 – £48.4m).
Net cash generation was £21.0m (2016 –
£42.8m). After an adverse exchange rate
impact of £20.5m (2016 – £16.1m), closing
net debt was £309.9m (2016 – £309.9m)
and gearing was 61% (2016 – 67%).
UK
The composition of the UK revenue and
operating profit is set out below:
Revenue
Vehicle hire
Vehicle sales
Operating profit
Operating margin
2017
£m
2016
£m
Change
£m
Change
%
272.2
144.0
416.2
43.9
16.1%
290.7
123.4
414.1
55.4
19.1%
(18.5)
20.6
2.1
(11.5)
(6.4)
16.7
0.5
(20.8)
A decrease in hire revenue of 6.4% was
primarily driven by a decrease in the average
number of vehicles on hire of 6.3%.
The impact of previous changes to
depreciation rates decreased operating profit
by £4.1m compared to the prior year.
The increased volume of vehicles sold was
offset by a higher net book value per vehicle
sold as a result of previous depreciation
rate changes. The total impact was a £4.8m
decrease in operating profit compared to
the prior year. This equates to a PPU of £703
compared to £979 in the prior year.
Spain
The revenue and operating profit generated
in Spain is shown below:
Revenue
Vehicle hire
Vehicle sales
Operating profit
Operating margin
2017
£m
2016
£m
Change
£m
Change
%
163.4
63.2
226.6
42.6
26.1%
140.8
44.1
184.9
41.3
29.3%
22.6
19.1
41.7
1.3
16.1
43.4
22.6
3.2
1918
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWSTRATEGIC REPORT
FINANCIAL
REVIEW
CONTINUED
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Taxation
The Group’s underlying and statutory
effective tax rate was 16% (2016 – 21%).
Earnings per share
Underlying EPS was 47.3p compared to
49.0p in the prior year.
Underlying earnings for the purpose of
calculating EPS were £63.0m (2016 –
£65.4m). The weighted average number of
shares for the purposes of calculating EPS
was 133.2m, in line with the prior year.
Exceptional items
During the year £1.0m of exceptional net
costs were incurred (2016 – £3.3m) of which
£2.2m related to restructuring costs and a
£1.2m credit related to the settlement of an
historic tax case in Spain.
Dividend and capital allocation
Subject to approval, the final dividend
proposed of 11.6p per share (2016 – 10.9p)
will be paid on 23 September 2017 to
shareholders on the register as at close of
business on 11 August 2017.
Including the interim dividend paid of 5.7p
(2016 – 5.1p), the total dividend relating to
the year would be 17.3p (2016 – 16.0p).
The dividend is covered 2.7x by underlying
earnings.
The increase in hire revenue of 16.1%
benefitted from weaker Sterling across
the year. At constant exchange rates hire
revenue grew by 1.2% as average vehicles
on hire were 1.3% higher compared to the
previous year.
Weaker Sterling across the year benefitted
operating profit by £5.5m. The impact of
previous changes to depreciation rates
decreased operating profit by £1.6m
compared to the prior year.
An increased volume of vehicles sold was
offset by the impact of depreciation rate
changes and a higher net book value of
selling younger vehicles, contributing £1.0m
to the decrease in operating profit compared
to the prior year. In Euros this equates to a
PPU of €1,589 compared to €2,102 in the
prior year.
Corporate
Underlying corporate costs were £5.1m
(2016 – £5.1m).
Interest
Net underlying finance charges for the year
were £9.6m (2016 – £11.4m).
The net cash interest charge for the year was
£9.0m (2016 – £10.1m) benefitting by £1.3m
from lower levels of net borrowings, £0.6m
in relation to the tax settlement in Spain
partially offset by £0.1m of higher pricing
and £0.7m of adverse movements in foreign
exchange rates.
Non-cash interest reduced by £0.7m to
£0.6m (2016 – £1.3m).
Our objective is to build shareholder value
by generating returns above our cost of
capital. We will allocate capital within our
business in accordance with the framework
outlined below, with our first priority being
to allocate capital to support our growth
ambitions:
1.
Investment for growth in existing
network
2.
Investment in new sites
3. Provide regular returns to shareholders
4. Acquisitions
5. Return of surplus cash
We will continue to maintain our
balance sheet within the target leverage
range of 1.25 to 1.85 times net debt to
EBITDA, although we are prepared to
move temporarily outside of this range if
circumstances warrant it. This is consistent
with our objective of maintaining a balance
sheet that is efficient in terms of providing
long term returns to shareholders and
safeguards the Group’s financial position
through economic cycles.
2120
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWSTRATEGIC REPORT FINANCIAL
REVIEW
CONTINUED
Cash flow
A summary of the Group’s cash flows is shown below:
Underlying operational cash generation
Net capital expenditure
Net taxation and interest payments
Share purchases and refinancing costs
Free cash flow
Dividends
Net cash generated (outflow)
2017
£m
238.3
(174.1)
(21.2)
(0.1)
42.9
(21.9)
21.0
2016
£m
242.8
(155.5)
(18.8)
(5.6)
62.9
(20.1)
42.8
A total of £346.3m was invested in new vehicles compared to £296.2m in the prior year. The
Group’s new vehicle capital expenditure was partially funded by £177.0m generated from the
sale of used vehicles (2016 – £145.9m). Other net capital expenditure amounted to £4.8m
(2016 – £5.2m).
All vehicles required for the Group’s operations are paid for in cash up-front. The cash flow
generation of the Group in any year is therefore influenced by the capital expenditure to
grow the business or cash generated by adjusting the fleet size downwards if vehicles on hire
reduce. If the impact of increasing or reducing the fleet size in the year is removed from net
capital expenditure, the underlying free cash generation of the Group was as follows:
Free cash flow
Add back: Adjustment to net capital expenditure for
(contraction) growth in fleet size
Underlying free cash flow
2017
£m
42.9
1.1
44.0
2016
£m
62.9
(14.5)
48.4
Net debt reconciles as follows:
Opening net debt
Net cash (generated) outflow
Other non-cash items
Exchange differences
Closing net debt
2017
£m
309.9
(21.0)
0.5
20.5
309.9
2016
£m
337.8
(42.8)
(1.2)
16.1
309.9
Excluding the £20.5m impact of foreign exchange net debt reduced by £20.5m.
Borrowing facilities
As at 30 April 2017 the Group had £312m drawn against total committed facilities of £572m,
giving headroom of £260m, as detailed below:
UK bank facility
Loan notes
Other loans
Facility
£m
451
84
37
572
Drawn
£m
216
84
12
312
Headroom
£m
235
–
25
260
Maturity
Jun-20
Aug-22
May-17
to Nov-17
Borrowing
cost
2.33%
2.38%
0.93%
2.17%
The overall cost of borrowings at 30 April 2017 is 2.17% (2016 – 2.14%).
The margin charged on bank debt is dependent upon the Group’s net debt to EBITDA ratio,
ranging from a minimum of 1.50% to a maximum of 2.25%. The net debt to EBITDA ratio at
30 April 2017 corresponds to a margin of 1.75%.
Interest rate swap contracts have been taken out which fix a proportion of bank debt at
2.16% (2016 – 2.23%) giving an overall cost of bank borrowings (gross of cash balances) at
30 April 2017 of 2.16% (2016 – 2.12%).
The other loans consist of £11.5m of local borrowings in Spain and £0.5m of preference shares.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG
2322
25361.02 13-6-17 Proof FourREVIEWSTRATEGIC REPORT FINANCIAL
REVIEW
CONTINUED
The split of borrowings (gross of cash balances and excluding overdrafts) by currency is as
follows:
Euro
Sterling
Borrowings before unamortised arrangement fees
Unamortised arrangement fees
2017
£m
256
76
332
(2)
330
2016
£m
257
75
332
(3)
329
There are three financial covenants under the Group’s facilities which remain unchanged and
are as follows:
Interest cover
Loan to value
Debt leverage
Threshold
3x
70%
2x
April 2017
9.23x
37%
1.31x
Headroom
£56m (EBIT)
£289m (Net debt)
£84m (EBITDA)
April 2016
9.13x
39%
1.33x
Balance sheet
Net tangible assets at 30 April 2017 were
£509.7m (2016 – £463.4m), equivalent to a
net tangible asset value of 383p per share
(2016 – 348p per share).
Gearing at 30 April 2017 was 61%
(2016 – 67%).
Return on capital employed was 10.5%
(2016 – 12.2%).
Treasury
The function of Group Treasury is to mitigate
financial risk, to ensure sufficient liquidity is
available to meet foreseeable requirements,
to secure finance at minimum cost and to
invest cash assets securely and profitably.
Treasury operations manage the Group’s
funding, liquidity and exposure to interest
rate risks within a framework of policies
and guidelines authorised by the Board of
Directors.
The Group uses derivative financial
instruments for risk management purposes
only. Consistent with Group policy, Group
Treasury does not engage in speculative
activity and it is our policy to avoid using
more complex financial instruments.
Credit risk
The policy followed in managing credit risk
permits only minimal exposures, with banks
and other institutions meeting required
standards as assessed normally by reference
to major credit agencies. Our credit exposure
is limited to banks which maintain an A
rating. Individual aggregate credit exposures
are also limited accordingly.
Liquidity and funding
The Group has sufficient funding facilities
to meet its normal funding requirements
in the medium term as discussed above.
Covenants attached to those facilities as
outlined above are not restrictive to the
Group’s operations.
Capital management
The Group’s objective is to maintain a
balance sheet structure that is efficient in
terms of providing long term returns to
shareholders and safeguards the Group’s
financial position through economic cycles.
Operating subsidiaries are financed by
a combination of retained earnings and
borrowings.
The Group can choose to adjust its capital
structure by varying the amount of dividends
paid to shareholders, by issuing new
shares or by adjusting the level of capital
expenditure.
Interest rate management
The Group’s bank facilities and other loan
agreements incorporate variable interest
rates. The Group seeks to manage the risks
associated with fluctuating interest rates
by having in place a number of financial
instruments covering at least 50% of its
borrowings at any time. The proportion of
gross borrowings hedged into fixed rates
was 97% at 30 April 2017 (2016 – 91%).
Foreign exchange risk
The Group’s reporting currency is, and the
majority of its revenue (62%) is generated
in, Sterling. The Group’s principal currency
translation exposure is to the Euro, as the
results of operations, assets and liabilities
of its Spanish and Irish businesses must
be translated into Sterling to produce the
Group’s consolidated financial statements.
The average and year end exchange rates
used to translate the Group’s overseas
operations were as follows:
Average
Year end
2017
£ : €
1.18
1.18
2016
£ : €
1.35
1.28
The Group manages its exposure to
currency fluctuations on retranslation of the
balance sheets of those subsidiaries whose
functional currency is in Euro by maintaining
a proportion of its borrowings in the same
currency. The exchange differences arising
on these borrowings have been recognised
directly within equity along with the
exchange differences on retranslation of
the net assets of the Euro subsidiaries. At
30 April 2017 70% of Euro net assets were
hedged against Euro borrowings (2016 –
78%).
Going concern
Having considered the Group’s current
trading, cash flow generation and debt
maturity including severe but plausible
stress testing scenarios, the Directors have
concluded that it is appropriate to prepare
the Group financial statements on a going
concern basis.
Paddy Gallagher
Chief Financial Officer
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG
GAAP RECONCILIATION
A reconciliation of GAAP to non-GAAP underlying measures is as follows:
Profit before tax
Add back:
Restructuring costs
Intangible amortisation
Spain tax settlement
Refinancing costs
Underlying profit before tax
Group
2017
£000
72,222
2,189
1,830
(1,235)
–
75,006
Group
2016
£000
77,632
1,777
1,979
–
1,561
82,949
Group
2017
£000
60,901
Group
2016
£000
61,479
Profit for the year
Add back:
Restructuring costs
Intangible amortisation
Spain tax settlement
Refinancing costs
Tax on exceptional items and intangible
(1,446)
amortisation
Underlying profit for the year
65,350
Weighted average number of Ordinary shares 133,232,518 133,232,518
49.0p
Underlying basic earnings per share
2,189
1,830
(1,235)
–
1,777
1,979
–
1,561
(686)
62,999
47.3p
Operating profit
Add back:
Restructuring costs
Intangible amortisation
Spain tax settlement
Underlying operating profit
Group
2017
£000
81,482
2,189
1,830
(896)
84,605
Group
2016
£000
90,563
1,777
1,979
–
94,319
UK
2017
£000
Underlying operating profit (loss)
43,886
Divided by: Revenue: hire of vehicles 272,168
16.1%
Underlying operating margin
UK
2016
£000
Underlying operating profit (loss)
55,392
Divided by: Revenue: hire of vehicles 290,714
19.1%
Underlying operating margin
Spain
2017
£000
42,607
163,419
26.1%
Spain
2016
£000
41,267
140,781
29.3%
Ireland
2017
£000
3,233
21,528
15.0%
Ireland
2016
£000
2,759
16,691
16.5%
Corporate
2017
£000
(5,121)
–
–
Eliminations
2017
£000
–
Group
2017
£000
84,605
(995) 456,120
18.5%
–
Corporate
2016
£000
(5,099)
–
–
Eliminations
2016
£000
–
(1,052)
–
Group
2016
£000
94,319
447,134
21.1%
Net (decrease) increase in cash and cash equivalents
Add back:
Receipt of bank loans and other borrowings
Repayments of bank loans and other borrowings
Net cash generated (outflow)
Add back: Dividends paid
Free cash flow
Add back: Adjustment to net capital expenditure for growth (contraction)
in fleet size
Underlying free cash flow
Group
2017
£000
(328)
–
21,369
21,041
21,875
42,916
1,127
44,043
Group
2016
£000
5,586
(70,410)
107,653
42,829
20,114
62,943
(14,545)
48,398
2524
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWSTRATEGIC REPORT
KEY
PERFORMANCE
INDICATORS
FINANCIAL
OPERATIONAL
1
Earnings
Underlying PBT and EPS
are key measures of
profitability.
Return on Capital
Employed (ROCE)
In a capital intensive
business ROCE is an
important measure of
performance.
Utilisation needs to be
optimised in order to be
operationally efficient but
must also be balanced
against the need to have
fleet available to meet
customer demand.
2
3
4
5
6
Asset management
Vehicle disposals
Customer service
Staff retention
The disposal channels we
use are key to minimising
the whole life holding cost
of vehicles.
The average number of
vehicles on hire during the
year is the primary driver
of hire revenue.
| Underlying PBT was
£75.0m
(2016 – £82.9m).
| Underlying EPS was
47.3p
(2016 – 49.0p).
| ROCE was 10.5%
(2016 – 12.2%).
| Group utilisation
| We disposed of
was 89%
(2016 – 89%).
33,800 vehicles across
the Group
(2016 – 30,500).
Attracting, retaining and
developing the right
people is key to the
successful delivery of our
strategy. Staff turnover
is a key measure for
monitoring performance in
this area.
| Group staff turnover
was 20%
(2016 – 23%).
In order to grow the
business we must deliver
the highest levels of
customer service to
set us apart from our
competitors. NPS is used as
a key measure to monitor
customer satisfaction.
| The average number of
vehicles on hire across
the Group was 80,800
(2016 – 82,800).
The reduction arose
in the UK, offset by
increases in Spain and
Ireland.
| NPS for the Group
was 41%
(2016 – 43%).
N
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25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG | PBT and EPS will
be affected by the
depreciation rate
change unwind in
the short term and
are then targeted to
increase.
| In the short term, as
the business expands
and the impact of
previous depreciation
rate changes continue
to impact results,
ROCE will be adversely
impacted. Over the
longer term the margin
of ROCE in excess of
our cost of capital is
targeted to exceed
levels previously
achieved.
| We continue to
target utilisation levels
above 90%.
| We continue to target
improvements in
our vehicle disposal
capabilities by
optimising the age and
channel of disposal.
| We aim to manage
staff turnover to a
percentage below
industry standards.
| Growth in vehicles
on hire is a primary
objective of the
Group. However, this
is only sought where
appropriate returns
exist.
| Our target is to achieve
an NPS in excess of
50% across the Group.
1
4
2
5
3
6
1
4
2
5
3
6
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2
3
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1
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2726
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWSTRATEGIC REPORT
MANAGING
RISK
B
O
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T
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U
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BOARD
AUDIT AND RISK
COMMITTEE
EXECUTIVE
COMMITTEE
GROUP
INTERNAL AUDIT
REGIONAL EXECUTIVE TEAMS
T
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O
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N
Our internal and external risk environments require
a dynamic, proactive approach to risk. The Group’s
risk appetite is approved by the Board and this
culture is disseminated throughout the organisation.
The Group takes a conservative view on risk overall.
There is an ongoing process of risk identification,
analysis and mitigation by the Board and throughout
the Group with reporting back upwards.
There is a formal governance structure
underpinning our approach to risk
management. Key roles and responsibilities
within the structure are as follows:
Board
The Board has overall responsibility for
risk management and internal control
and instilling the culture towards risk
management throughout the Group. The
Board manages this through the Audit and
Risk Committee, who report to the Board.
Audit and Risk Committee
The Audit and Risk Committee reviews
the Group’s risk appetite. The Committee
sets the objectives, monitors and reviews
the activities of Group Internal Audit and
oversees the Group’s whistleblowing
arrangements. The Committee monitors the
Group’s risk management processes focusing
on the effectiveness of internal controls and
business continuity procedures, including
cyber risk.
Executive Committee
The Executive Committee is chaired by
the CEO. More details on the role of the
Executive Committee is in the Introduction
to governance on page 45. The regional
executive teams report on risks to the
Executive Committee, which forms the
backdrop to the strategic review held in
this forum.
Group Internal Audit
Group Internal Audit are responsible for the
monitoring of the Group’s risk management
approach and provide a link between
regional management and the Audit and
Risk Committee. The Group Head of Internal
Audit reports formally to and attends the
meetings of the Audit and Risk Committee
and has direct access to the Chairman of the
Board and to all members of the Audit and
Risk Committee.
In addition to risk-based standardised site
audits, Group Internal Audit facilitate the
risk management process by meeting with
risk owners to monitor risk, discuss new
risks arising and to ensure that risks
monitored and reported on are consistent
across the Group.
Regional Executive Teams
Regional Executive Teams are responsible for
implementing risk management within the
Group’s operations. Regional management
identify, analyse, manage and report on
the risks that the businesses face as part
of a continuous dialogue with Group
Internal Audit.
Identification of risks
The Board and the Group’s management
have a clearly defined responsibility for
identifying the major business risks facing
the Group and for developing systems to
mitigate and manage those risks. The control
of key risks is reviewed by the Board and
the Regional Executive Teams at their
monthly meetings.
t
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Id
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i
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y
Risk
management
process
M
a
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e
alyse
A n
The Board can therefore confirm that
there is an ongoing process for identifying,
evaluating and managing the significant risks
faced by the Group, that it has been in place
for the year under review and up to the date
of approval of this annual report and accords
with corporate governance guidance and
therefore the Board has performed a robust
assessment of the principal risks facing
the Group.
Review of risk management
and internal control systems
During the previous year the Board
engaged a third party to perform a review
of the Group’s processes and procedures
to supplement and bring an alternative
perspective from that of the Board. The
findings of this review contained a number
of recommendations. During this year work
has continued on implementing these
recommendations and embedding the good
practice recommendations received so that
they become business as usual as part of our
risk management processes.
Risk appetite
Risk is always high on the Board’s agenda
and the focus on effective risk management
cascades all the way through the
organisation. The culture of the organisation
ensures that all activities from day-to-day
operations to high level strategic decisions
are performed in line with this approach.
Management’s assessment of our principal
risks is based on impact, likelihood, change
from the prior year and appetite.
The governance of risk is undertaken in the
context of the Group’s overall risk appetite.
The Group considers risk appetite to ensure
adequate resources are allocated to the
correct risks. During the year the Audit and
Risk Committee reviewed the Group’s risk
appetite statement, which subdivides the
Group’s six principal risks into 14 specific
risks. The results were as follows:
Risk appetite
Minimal
Low
Medium
High
Total
Number of specific risks
3
8
3
–
14
This demonstrates that the Group takes a
conservative view towards risk and attempts
to minimise its exposure to undue risk.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG
2928
25361.02 13-6-17 Proof FourREVIEWSTRATEGIC REPORT MANAGING
RISK
Principal risks and uncertainties
CONTINUED
Evaluation is defined as Management’s assessment of whether the risk factor has:
Increased
Decreased
Stayed the same since the prior year.
1
2
3
4
5
6
Economic
environment
The demand for our products
and services could be affected
by a downturn in economic
activity in the countries in which
the Group operates.
K
S
I
R
The high level of operational
gearing in our business model
means that changes in demand
can lead to higher levels of
variability in profits.
An adverse change in
macroeconomic conditions
could also increase the risk of
customer failure and therefore
incidences of bad debts.
Demand for our products and
the cost of our supplies may be
impacted by the
UK’s decision to leave the EU.
I
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M
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B
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Vehicle holding
costs
The profitability of the Group
is dependent upon minimising
vehicle holding costs, which
are affected by the pricing
levels of new vehicles
purchased and the disposal
value of vehicles sold.
An increase in holding costs,
if not recovered through hire
rate increases, would adversely
affect profitability, shareholder
returns and cash generation.
Competition and
hire rates
The markets in which
the Group operates are
fragmented and competitive
meaning that price
competition is high.
There is a risk that the Group
fails to attract and retain
customers on the basis of
pricing. This could either
be as a result of pricing too
highly or not adequately
communicating the value
of service provided which
underpins our pricing.
If our pricing is perceived
to be higher than our
competition for the same
level of service, then we will
either lose market share or
be forced to reduce prices to
remain competitive. Without
any adjustment to the cost
base, this will result in an
erosion of returns.
Employees and
the working
environment
Failure to attract, develop and
retain individuals with the
appropriate skills will inhibit
the successful delivery of
our strategy.
Inadequate maintenance of
our vehicles and a working
environment where individuals
do not receive appropriate
training and support could
place employees and
customers’ employees at
risk from failures in health
and safety.
Failure to invest in our
workforce and high levels
of staff turnover will impact
upon customer service and
delivery of the Group’s
strategic objectives.
Our recruitment processes
seek to attract individuals who
will exemplify our core values.
Each new joiner receives
an introduction to the
Group’s culture as well as
our processes.
Failures in health and safety
would put the reputation
of the business at risk,
both in terms of attracting
and retaining talent and
maintaining customer
relationships.
Access to capital
The Group requires capital to
replace vehicles at the end of
their rental life and for any
growth in the fleet. The Group
therefore requires continued
access to adequate credit
facilities and to remain in
compliance with its financial
covenants.
IT systems
The Group’s business involves
a high number of operational
and financial transactions
across numerous sites which
rely on the continuous
operation of our IT systems.
If IT systems are not invested
in appropriately there is a
risk that the operations of
the business will become less
efficient and this in turn could
impact upon customer service
delivery.
Failure to maintain or
extend access to credit facilities
could impact on the Group’s
ability to continue as a
going concern.
Should IT systems not be
invested in adequately or
fail, whether the cause is
accidental or malicious,
this could have an adverse
impact on the recording
and processing of financial
information, efficiency of
operations and customer
service delivery.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG
Core pricing is based upon
target levels of return with
discount authority levels
allowing flexibility to ensure
that we remain competitive
on pricing.
Further investment will be
made in marketing to ensure
that the value proposition
underpinning pricing is well
communicated and received
(see Strategy section on
page 10).
Pricing is negotiated with
manufacturers on an annual
basis in advance of purchases
being made. Variable supply
terms allow us flexibility to
make purchases as required
throughout the year.
Whilst the Group is exposed
to fluctuations in the used
vehicle market, we have
sought to optimise the sales
route for each vehicle. Should
the market experience a short
term decline in residual values,
we can age our existing
fleet until such time as the
market improves.
Personal development plans
and tailored training are
conducted for all employees.
Salaries are benchmarked
against the market and
a range of incentives are
provided to attract and retain
staff. Succession plans are in
place for executive positions.
Regular communication and
engagement with everyone
across the business is vital to
our success.
The Group Health, Safety
and Environment and Group
Internal Audit functions are
responsible for delivering
health and safety best practice
and reporting any non-
compliance to the Board.
The Group has an appropriate
business continuity plan in
the event of disruption arising
from an IT systems failure.
Before any material system
changes are implemented
a project plan is approved
by the Board. A member of
the executive team will then
sponsor the project and an
ongoing implementation
review will be performed by
external consultants. The
objective is always to minimise
the risk of business disruption
that could result from changes.
The Group’s main facilities
mature in 2020 and 2022
and the Group believes
that these facilities provide
adequate resources for
present requirements.
The Group reviews its
compliance with covenants on
a monthly basis in conjunction
with cash flow forecasts to
ensure ongoing compliance.
The impact of access to capital
on the wider risk of going
concern is considered on page
24 and within the viability
statement on page 33.
Should there be a significant
economic downturn the
flexible nature of the Group’s
business model allows any
vehicles returned to be placed
with different customers.
Alternatively, utilisation can be
maintained through purchasing
fewer vehicles, increasing
disposals or a combination of
the two. Although this may
affect short term profitability
it generates cash and reduces
debt.
No individual customer
contributes more than 5%
of total revenue generated,
and ongoing credit analysis is
performed on new and existing
customers to assess credit risk.
With regards to the UK’s
decision to leave the EU the
Group’s current hedging
arrangements protect it from
material foreign exchange risks
and the Group has in place
sufficient borrowing facilities
to fund its activities with
maturities up to five years. Any
impact on demand or the cost
of supplies is not yet known.
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25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWSTRATEGIC REPORT MANAGING
RISK
CONTINUED
25361.02 13-6-17 Proof Four Viability statement
The Directors have assessed the viability of the Group over
a three year period to 30 April 2020, taking into account
the Group’s current position and the potential impact of
the principal risks documented in the Strategic report.
Based upon this assessment the Directors have a reasonable
expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the
period to 30 April 2020.
As explained in the Strategic Report, part of our core
business provides customers with vehicles on a non-contract
basis which allows them to flex their vehicle requirements as
their business needs change. This is core to the proposition
we offer, however, it does mean that there is less certainty
over the future revenue streams of the Group over a
longer period of time. The Directors have therefore made
assumptions on future revenue generation in the context of
current market conditions and prospects of the Group.
In making this statement, the Directors have considered
the resilience of the Group, taking into account its current
position and the principal risks facing the business. The
Plan was stress tested for severe but reasonable scenarios
and the effectiveness of any mitigating actions that would
reasonably be taken. The Plan was specifically stress tested
for reasonable downturns in vehicles on hire, hire rates,
vehicle acquisition costs and residual values of vehicles. The
outcome of this testing satisfied the Directors with respect
to the ongoing liquidity and solvency of the Group over
the period under review. In particular, should there be a
significant downturn in demand for the Group’s business,
vehicle utilisation can be maintained through purchasing
fewer vehicles, increasing disposals, or a combination of the
two, which would generate cash and reduce debt.
The three year period was selected as this represents
the normal holding period of our core vehicle assets and
therefore represents the Company’s investment cycle. This
period is aligned to how our business model runs through its
cycle, how capital is employed in the business and therefore
how returns on investment are reviewed. Our core banking
facilities also mature in 2020.
The strategy and associated principal risks underpin the
Group’s three year strategic planning process (the Plan),
which is updated annually. This process takes into account
the current and prospective macroeconomic conditions
in the countries in which we operate and the competitive
tension that exists within the markets that we trade in.
The Plan also encompasses the projected cash flows,
dividend cover and headroom against financial covenants
under the Group’s existing facilities. The Plan makes certain
assumptions about the normal level of capital recycling
likely to occur and therefore considers whether additional
financing will be required. Headroom against the Group’s
existing facilities at 30 April 2017 was £260m as detailed
on page 22. The facilities have maturity dates between May
2017 and August 2022, which exceeds the period under
review and provides sufficient headroom to fund the capital
expenditure and working capital requirements during the
planned period.
3332
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWSTRATEGIC REPORT CORPORATE
SOCIAL
RESPONSIBILITY
Relationships are vital to the Group
in achieving our aims of delivering
market leading levels of customer
service and providing significant
returns to our shareholders.
Outlined below are details of five key
relationships and the steps we take to
engage with these groups and what they
provide in return in order to allow us to build
a responsible and sustainable business.
2. Our shareholders and lenders
A description of the relationship we have
with shareholders is contained within the
Corporate governance report on pages 48
to 50.
We will not allow success to give way to
complacency and will strive to do all we can
to maintain and deepen these relationships
in order to best serve our customers,
provide returns to our shareholders and be a
responsible corporate citizen.
1. Our customers
Our customers are vital to the ongoing
success of the Group. As a Group we are
dedicated to providing a market leading
service to all of our customers.
All elements of our strategy, as outlined on
pages 10 to 11 contribute towards this.
We measure how strong our relationships
with our customers are through our NPS
scores. For 2017 Group NPS was 41%
compared to 43% in the prior year.
We will continue to work hard towards
delivering exceptional customer service and
the medium term aim is to achieve a score of
50% in all three territories.
Our customers provide valuable insight on
how we can improve what we do in order to
build a long term, sustainable business.
Our lenders provide us with the funding
we need in order to meet the capital
requirements of the Group and day-to-
day working capital requirements. Our
borrowing rates are competitively priced and
enable us to provide adequate returns to
shareholders and lenders.
3. Our employees
Without our employees the Group would
not be capable of operating. They enable
the high levels of customer service to be
delivered which is reflected in our improved
NPS scores over recent years. Northgate is
committed to equality, judging applications
for employment neither by race, nationality,
gender, age, disability, sexual orientation or
political bias.
Our ethical standards are communicated
to employees through the Group’s Code
of business conduct, which covers bribery,
competition, conflicts of interest, inside
information, confidentiality, gifts and
entertainment, discrimination, harassment
and fair dealing with customers and
suppliers. In addition, the Group’s
whistleblowing policy and procedure
enables every employee to have a voice
and a means by which they may draw
concerns to our attention.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG 3534
25361.02 13-6-17 Proof FourREVIEWSTRATEGIC REPORT CORPORATE
SOCIAL
RESPONSIBILITY
CONTINUED
The composition of our employees as at 30 April is as follows:
UK
Spain
Ireland
Total
Male
1,286
668
69
2,023
2017
Female
495
370
28
893
Total
1,781
1,038
97
2,916
Male
1,291
646
59
1,996
The gender split at a senior management level is as follows:
Directors
Senior managers
2017
Male
5
21
Female
2
5
2016
Female
496
348
19
863
2016
Male
4
20
Total
1,787
994
78
2,859
Female
2
3
Providing our employees with an environment where they can flourish will ensure that our
business is as good as it can be. At its simplest level this means ensuring that everyone feels
safe at work. Clear communication ensures that employee goals are aligned to the Group
and regular training enables each individual to perform to the best of their ability and have
the opportunity to progress their career within the Group.
Safety
Our approach to safety is simple: to ensure
that no harm comes to anyone engaged
with Northgate.
Our ‘Safe and sound’ programme creates an
environment of openness and awareness,
where all colleagues feel empowered to
raise concerns about working practices and
conditions. Regular training is provided
to employees, most of which is carried
out internally by our Health, Safety &
Environment team.
The Health, Safety & Environment team
carried out audit reviews to measure
performance of safety and environment
management processes at all locations
across the Group during the year and where
necessary identified improvements and
subsequently monitored compliance with
these recommendations.
We aim to have as low an AFR as possible.
AFRs are monitored against previous
performance and if there were to be a
significant decline in performance then a
root cause analysis, over and above the
continuous monitoring currently in place,
would be performed.
Internal communications
The Group mixes face-to-face, digital and
traditional communications channels in order
to maximise the impact of communication
with our employees. Examples include
newsletters, staff conferences and use
of Yammer.
Training
We use multiple training platforms for our
people. These include launching Leadership
and Operations Academies in the UK and
the Northgate Campus online platform
in Spain.
Safety performance across the business is
measured using an Accident frequency rate
(AFR). This is calculated as the number of
lost time incidents, multiplied by 100,000,
divided by the number of hours worked. The
results were as follows:
Human rights
Information on equality is contained above
and our corporate social responsibility
information, including our statement of
compliance with the Modern Slavery Act,
is contained on our website:
UK
Spain
Ireland
Group
2017
0.8
1.9
1.0
1.2
2016
0.9
2.2
1.1
1.4
2015
1.1
2.2
1.4
1.5
www.northgateplc.com
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Spain
Our Spanish business engaged with a
number of community and charity initiatives
over the year. This included continued
sponsorship of Gavi – a vaccine alliance –
and a cycling event in Madrid in support
of childhood cancer. 300kg of food was
collected for a local charity as part of a
basketball exhibition event with the most
prominent local basketball team in Seville.
The communities we operate in provide the
core of our workforce, meaning that our
employees understand the communities in
which we are present.
Environment
The activities that we undertake also have
a wider impact on the environment. The
main measure that we use to assess our
environmental impact is greenhouse
gas emissions.
4. Our suppliers
Maintaining a positive working relationship
with our suppliers is vital to ensure that we
have the right vehicles in the right place at
the right time to ensure customer needs
are met. Vehicle pricing is negotiated on
an annual basis and we maintain an active
dialogue with suppliers throughout the
year too.
Our strong manufacturer relationships
provide a competitive advantage and
generate value to the Group.
5. Our communities and
the environment
The Group operates from 122 locations
across the UK, Spain and Ireland. This
impacts on the local communities who
accommodate us and the environments we
operate in.
Communities
One of the main ways we give back to
our local communities is through actively
encouraging our colleagues to engage
with charities that are close to their hearts.
All charitable activity is promoted and
championed through ongoing internal
communications.
UK and Ireland
Amongst the many charitable activities
undertaken by employees, the business held
a company wide Christmas jumper day in
aid of Save the Children and members of
one division spent a night sleeping outdoors
in support of Byte Night in association with
Action for Children. These are only some
examples of the variety of worthwhile causes
our people invest their time in.
Greenhouse gas emissions
This section incorporates the mandatory reporting of greenhouse gas emissions required
by the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013
(the Regulations).
Reporting and baseline year
The information presented covers the period from 1 May 2016 to 30 April 2017, with a
comparison to the prior year. The base year for calculations is the year ended 30 April 2014.
Consolidation approach and organisational boundary
The emissions data presented has been derived using the operational control approach,
required under the Companies Act 2006 (Strategic Report and Directors’ Reports)
Regulations 2013. Each facility under operational control has been included within the
figures. Northgate has used the principles of the GHG Protocol Corporate Accounting and
Reporting Standard (revised edition), ISO 14064-1.
Methodology
Defra’s current conversion factors have been used in arriving at the information supplied
below. All six greenhouse gases are reported as appropriate.
Greenhouse gas emissions figures
Greenhouse gas emissions source
Scope 1 – Combustion of fuel and operation of facilities
Scope 2 – Electricity, heat, steam and cooling
Intensity ratio: Tonnes of CO2e per £m of revenue
Tonnes of
CO2e
2017
6,701
4,189
23.9
Tonnes of
CO2e
2016
6,201
4,766
24.5
The above data has been verified by an independent, UCAS accredited,
third party assessor.
3736
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWSTRATEGIC REPORT CORPORATE
SOCIAL
RESPONSIBILITY
CONTINUED
Spain
| A new e-contracting system reduces
paper usage and cuts down journeys to
exchange contracts; and
| An increase in the number of electric and
hybrid vehicles on the fleet contributing
towards emissions reductions.
Our dedication to robust environmental
principles, policies and procedures has
meant that we have maintained ISO 14001
accreditation in both the UK and Spain.
We recognise the need to support our
customers in managing a sustainable
business. We work with our suppliers to
make a fleet available to our customers
comprised entirely of modern vehicles,
achieving the highest levels of exhaust
emission standards.
A number of initiatives have been introduced
during the year to reduce our greenhouse
gas emissions. These include:
UK and Ireland
| Widening the roll out of LED lighting
following a successful trial in one
geographical area;
| Trialling heating controls to reduce
energy usage; and
| Continuing to increase diversion rates
from landfill.
WASTE DIVERSION
Diverting waste from landfill has been a key environmental focus for our UK business
over the past three years. A combination of encouragement and training in this area
has led to significant engagement from our colleagues and we have become one of our
waste management partner’s best performers in this area.
DIVERSION RATE FROM LANDFILL
85%
87%
99%
68%
APR 14
APR 15
APR 16
APR 17
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG 3938
25361.02 13-6-17 Proof FourREVIEWSTRATEGIC REPORT GOVERNANCE
This section explains our approach to
governance from Board level down,
including governance structures, activities
of the various Board committees and the
key skills of those charged with governance.
42 Board of Directors
44 Chairman’s introduction to governance
45 Introduction to governance
48 Corporate governance
51 Report of the Audit and Risk Committee
54 Remuneration report
74 Report of the Directors
77 Statement of Directors’ responsibilities
78 Independent auditor’s report to the
members of Northgate plc
25361.02 13-6-17 Proof Four 4140
25361.02 13-6-17 Proof FourREVIEWGOVERNANCE BOARD OF
DIRECTORS
Andrew Page
Chairman
Kevin Bradshaw
Chief Executive Officer
Paddy Gallagher
Chief Financial Officer
Bill Spencer
Senior Independent Director
Joined Board
December 2014
January 2017
February 2016
June 2016
Remuneration, Nominations (Chairman)
| Previously CEO of a FTSE 250 business
| International business
| Major capital investment decisions
| Chartered Accountant
| Experienced CEO – track record of
driving value growth
| Turnaround of a UK multi-site vehicle
rental business
| Strategy development
| Significant cross-sector experience
| International business
| Chartered Accountant
Audit & Risk (Chairman), Remuneration,
Nominations
| International business
| Former CFO of a FTSE 100 company
| Wide multi-industry experience
Exova Group –
Senior Independent Director and Chairman of
Audit Committee
Ricardo plc – non-executive Director
Committee
membership
Key skills and
experience
Current
positions
Former
positions
Carpetright –
Senior Independent Director
Schroder UK Mid Cap Fund plc –
non-executive Director
JP Morgan Emerging Markets Investment
Trust plc –
non-executive Director
Restaurant Group plc –
Chief Executive Officer
Arena Leisure plc –
Senior Independent Director
Wyevale Garden Centres – CEO
Avis Europe plc – UK Managing Director
and Group Chief Information Officer
Spirit Pub Company plc – CFO
The Rank Group plc – CFO
Dell Inc – CFO various countries
Intertek Group – CFO
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Committee
membership
Key skills and
experience
Current
positions
Former
positions
Andrew Allner
Non-executive Director
Jill Caseberry
Non-executive Director
Claire Miles
Non-executive Director
Joined Board
September 2007
December 2012
November 2015
Audit & Risk, Remuneration (Chairman),
Nominations
Audit & Risk, Remuneration,
Nominations
Katie Wood
Company Secretary
December 2016
Secretary to each Committee
| Significant Board experience
| UK and multinational experience
| Chartered Accountant
| Sales
| Marketing
| General management
| Commercial strategy
| Multi-channel customer operations
| Large scale transformation
| International business
| Qualified Solicitor
| Risk Management
Marshalls plc – Chairman
Go Ahead Group plc – Chairman
Fox Marble Holdings plc – Chairman
RHM plc – Finance Director
Enodis Plc – Chief Executive
AZ Electronic Materials SA –
Senior Independent Director and
Chair of Audit Committee
CSR plc – Chair of Audit Committee
Moss Bros Group plc –
Chair of Audit Committee
Price Waterhouse – Partner
Enhance Drinks Limited –
Chief Executive
UK Customer Operations, Centrica
Consumer – Managing Director
Mars –
Various Sales and Marketing roles
PepsiCo –
Commercial Director
Premier Foods –
General Manager
Santander Cards –
Managing Director, Retail Distribution
GE Money –
Commercial Director
HFC Bank – Head of Cards
Carr’s Group plc –
Company Secretary
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25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWGOVERNANCE CHAIRMAN’S
INTRODUCTION
TO GOVERNANCE
At Northgate we recognise
the vital role that governance
plays in delivering the best
outcomes for all stakeholders in
the business.
ANDREW PAGE I CHAIRMAN
Dear Shareholder,
At Northgate we recognise the vital role
that governance plays in delivering the
best outcomes for all stakeholders in the
business. Our rigorous systems of risk
management and internal control ensure
that our businesses operate within the Board
approved risk appetite levels set out in the
Managing risk report on page 28.
Governance issues tackled during the year
include changes to the Board and acting
upon the recommendations from the
previous external Board evaluation – all with
a focus on positioning the Group to be in
the strongest position it can be to provide
fantastic service to our customers and long
term sustainable value to our shareholders.
Board changes
During the year Kevin Bradshaw was
appointed as Chief Executive Officer.
Kevin brings with him a strong cross-
sector background and in-depth industry
knowledge from his time spent with Avis.
I am confident about the Group’s future
prospects under Kevin’s leadership.
Katie Wood has also been appointed
as Company Secretary during the year,
following the retirement of David Henderson
after 47 years’ service. Katie’s experience
and ability to link the operational businesses
with non-executive oversight have helped
with the smooth functioning of the Board.
Board evaluation
As an external Board evaluation was
conducted last year, this year the Board
has concentrated on acting upon the
recommendations from that report and
performed an internal assessment of
effectiveness. One of the key areas for
development has been the inclusion of site
visits and the areas of focus for next year are
further market and strategic analysis as Kevin
Bradshaw presents his vision for the Group.
Compliance with the Code
As disclosed in last year’s Annual Report,
Andrew Allner completed nine years’ service
to the Group in September 2016, meaning
that he could no longer be classed as
independent by the Code or ABI. However,
due to the continued benefit of Andrew’s
wise counsel it was determined that he
should remain on the Board for a further
year, until September 2017. We are also
proposing that Andrew be re-elected for a
further year.
This means that the Board did not comply
with section B.1.2 of the Code. However,
we feel that maintaining a Board with an
appropriate mix of skills and experience
serves our stakeholders well.
There have been no significant changes
to the UK Corporate Governance Code
during the year and the Board considers that
it has complied with the provisions of the
Code throughout the year, other than as
described above.
Good governance is a cornerstone of our
business and the disciplines and practices
that contribute to this are well understood
by the Northgate team.
Andrew Page
Chairman
26 June 2017
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG INTRODUCTION
TO GOVERNANCE
BOARD
Executive
Directors
Audit and Risk
Committee
Remuneration
Committee
Nominations
Committee
Executive
Committee
Internal
Audit
Responsibilities
Board
The Board has overall responsibility for:
| Determining the strategy and values of
the Group and ensuring long term success
for the benefit of all stakeholders;
| Ensuring that adequate resources are
available so that strategic objectives may
be achieved through the annual planning
process and ongoing monitoring;
| Ensuring that the Company’s internal
control systems (both financial and
operational) are fit for purpose and
operating as they should be;
| Reporting to and relationships with
shareholders;
| Compliance with laws and regulations
| IT infrastructure and cyber risk
and good corporate governance;
| Product and market development
2018 key focus
| Execution of Group strategy
| Dividend policy;
| Treasury policy;
| Insurance policy;
| Major capital expenditure;
| Acquisitions and disposals;
| Board structure; and
| Remuneration policy.
2017 key activities
| Appointment of new
Chief Executive Officer
| Implementing recommendations of
external effectiveness review
| Strategic review
| Review of the Group risk management
process and reporting
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25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWGOVERNANCE INTRODUCTION
TO GOVERNANCE
CONTINUED
Responsibilities
Executive Directors
Executive Directors are responsible for:
| Ensuring the Group strategy is executed effectively via the Executive Committee;
| Monitoring Group performance;
| Managing the Group’s financial affairs; and
| Implementation and review of the system of internal control.
Executive Committee
The Executive Committee is responsible for:
| Executing Group strategy and policies;
| Considering operational business issues;
| Reviewing risk reporting and taking necessary actions; and
| Managing business performance.
Audit and Risk Committee
The Audit and Risk Committee is responsible for:
| Monitoring the integrity of financial reporting and reviewing the Group’s risk management
systems on behalf of the Board, including reviewing the work of Group Internal Audit;
| Overseeing the statutory audit process:
— Recommending appointments to the Board;
— Monitoring independence and objectivity, including monitoring auditor rotation and
developing policy on non-audit services provided;
— Approving auditor remuneration and terms of engagement; and
— Overseeing the audit tender process, if applicable.
Further information on the work of the Audit and Risk Committee is
detailed in the Report of the Audit and Risk Committee on pages 51 to 53.
Refreshed strategy
With Kevin Bradshaw joining as CEO
in January 2017 his focus has been on
performing an in-depth review of the
business and its markets and developing
the strategy, as set out on page 10.
Strategic focus
Contribution towards the refreshing
of Group strategy and subsequent
implementation within the business.
Risk management
Implemented the recommendations from
the prior year external review and made
further improvements to the end-to-end
processes of identifying and reporting
risks. Commissioned an external review
of the work of Group Internal Audit and
implemented recommendations arising
from this.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Responsibilities
Remuneration Committee
The Remuneration Committee is responsible for:
| Assessing, reviewing and agreeing with the Board the remuneration policy for the Board
excluding the non-executive Directors;
| Assessing and reviewing the remuneration policy and benefit structure for Group
employees; and
| Monitoring the share incentive plans including participation and exceptional circumstances
and amending the design of the plans in line with best practice.
Policy review
Undertook a full review of remuneration
policy, which will be presented for a
binding vote at this year’s AGM.
The Committee also determined the
remuneration to be awarded to the
newly appointed CEO.
The Remuneration Report can be found on pages 54 to 73.
Nominations Committee
The Nominations Committee is responsible for:
| Reviewing the structure, size, skills and experience of the Board and making
recommendations regarding any changes;
| Considering succession planning for Directors and other senior executives; and
| Making recommendations to the Board for candidates to fill Board vacancies when they
arise, normally using the services of professional consultants in the search.
New appointment
During the year the Nominations
Committee approved the appointment of
a new CEO.
The full terms of reference of the Audit and Risk, Remuneration and Nominations Committees can be found on the Group’s corporate website.
46
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25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWGOVERNANCE Northgateplc.com stock code: NTG
We recognise the vital role
that good governance plays in
delivering the best outcomes for
all stakeholders in the business.
UK Listed Companies are required by the FCA (the designated UK Listing
Authority), to include a statement in their annual accounts on compliance
with the principles of good corporate governance and code of best
practice set out in the Code. The provisions of the Code applicable to listed
companies are divided into five parts, as set out below:
1. Leadership
The business is managed by the Board of Directors, currently
comprising two executive and five non-executive Directors,
details of whom are shown on pages 42 and 43. The offices
of the Chairman and Chief Executive Officer are separate.
An overview of the leadership of the Group, including the
responsibilities and activities of each component is outlined
on pages 45 to 47.
2. Effectiveness
Information supplied
The Chairman ensures that all Directors are appropriately
briefed to enable them to discharge their duties.
Management accounts are prepared and submitted to
the Board on a monthly basis. Before each Board meeting
appropriate documentation on all items to be discussed is
circulated.
1
2
Leadership
Effectiveness
5
Relations with
shareholders
3
Accountability
4
Remuneration
25361.02 13-6-17 Proof Four
Attendance
Directors’ attendance at Board and Committee meetings during the year is detailed as follows:
No. of meetings
AJ Allner1
K Bradshaw2
J Caseberry
RL Contreras3
P Gallagher
C Miles
A Page
B Spencer4
Board
8
Audit and Risk
Remuneration
Nominations
4
4
3
–
–
–
–
–
–
–
–
–
–
1 Retired from all Committees in September 2016.
2 Appointed 11 January 2017.
3 Resigned 11 January 2017.
4 Appointed to Board 1 June 2016 and appointed Chairman of Audit & Risk Committee 1 October 2016.
All Directors in office at that time were present at the AGM
held in September 2016.
The external auditor and the Head of Group Internal Audit
attended all Audit and Risk Committee meetings.
Andrew Allner completed nine years’ service as a non-
executive Director of the Company in September 2016 and
therefore is no longer regarded as independent in terms of
the Code or by the ABI. Bill Spencer, appointed to the Board
as a non-executive Director on 1 June 2016, assumed the
roles of Senior Independent Director and Chairman of the
Audit and Risk Committee on 1 October 2016. This means
that the Board was not compliant with section B.1.2 of
the Code (more than half of the Directors, excluding the
Chairman, should be independent) from September 2016 to
the date of this report. However, we feel that maintaining a
Board with an appropriate mix of skills and experience serves
our stakeholders well.
Board review
The internal evaluation established that the Board had built
on the evaluation recommendations from the previous year.
It highlighted areas for additional focus in FY2018, which
included further market and strategic analysis. With the
appointment of Kevin Bradshaw in January 2017 a refreshing
of the Group’s strategy was undertaken and this will be a
further focus of the Board throughout FY2018. In addition,
a review against new strategic objectives will be regularly
monitored.
The inclusion of site visits for Board meetings during the
year had a positive impact on employee engagement
and enhanced the Board’s first-hand experience of the
Company’s operations; this will continue throughout
FY2018.
Diversity
The Board has considered the recommendations of the
Davies Review into Women on Boards in the light of the
provisions of both section B.2 of the Code, with which we
are compliant, and of our existing policies and procedures.
The Board recognises the benefits of diversity at all levels
of the business and in order to reinforce the Board’s
commitment to equality, the Board has endorsed an Equal
Opportunities Policy, which may be found on our website at:
www.northgateplc.com
Whilst the overriding criteria for Board appointments will
always be based on merit, so as to encourage an appropriate
balance of skills, experience and knowledge on the Board
at all times, for all future appointments we will only use
executive search firms who have committed to the Voluntary
Code of Conduct on gender diversity.
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25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWGOVERNANCE CORPORATE
GOVERNANCE
CONTINUED
At the same time the Board recognises that, particularly
given the nature of its business, the development of a pool
of suitably qualified candidates may take time to achieve and
therefore does not believe it is appropriate to set targets,
however aspirational, at the present time.
At 30 April 2017 29% of Board members, 19% of the senior
management team and 31% of all employees were female.
Conflicts of interest
Pursuant to those provisions of the Companies Act 2006
relating to conflicts of interest and in accordance with the
authority contained in the Company’s Articles of Association,
the Board has put in place procedures to deal with the
notification, authorisation, recording and monitoring of
Directors’ conflicts of interest and these procedures have
operated effectively throughout the year and to the date of
signing of this report and accounts.
3. Accountability
Although no system of internal controls can provide absolute
assurance against material misstatement or loss, the Group’s
system is designed to provide the Directors with reasonable
assurance that, should any problems occur, these are
identified on a timely basis and dealt with appropriately.
Internal control
Confirmation that the Board has performed an assessment
of the risk management and internal control systems of the
Group, as required by the Code provision C.2.3, is contained
in the Managing risk report on pages 28 to 33.
Whistleblowing hotline
The Board has established a confidential telephone service,
operated by an independent external organisation, which
may be used by all staff to report any issues of concern
relating to dishonesty or malpractice within the Group. All
issues reported are investigated by senior management and
Internal Audit as appropriate.
Information and communication
Each reporting segment prepares monthly management
accounts with a comparison against their business plan
and prior year, with review by management of variance
from targeted performance levels. These commentaries
are consolidated and submitted to the Board. Year to date
actuals are used to guide forecasts, which are updated
regularly and communicated to the Board.
Planning
Each reporting segment prepares a three year business plan
on an annual basis. This is presented to and approved by
the Board. Performance against these plans is reviewed on a
monthly basis.
Assurance
A description of the work of the Audit and Risk Committee is
given on pages 51 to 53. Both the external auditor and Head
of Internal Audit report directly to the Committee.
4. Remuneration
Details of the Company’s remuneration policy and the
remuneration of each Director are given on pages 54 to 73.
5. Relations with shareholders
Throughout the year the Company maintains a regular
dialogue with institutional investors and market analysts,
providing them with such information on the Company’s
progress and future plans as is permitted within the
guidelines of the Listing Rules. In particular, twice a year,
at the time of announcing the Company’s half and full
year results, they are invited to briefings given by the CEO
and CFO.
The Company’s major institutional shareholders have been
advised by the Chief Executive Officer that, in line with the
provisions of the Code, the Senior Independent Director and
other non-executives may attend these briefings and, in any
event, would attend if requested to do so.
All shareholders are given the opportunity to raise matters
for discussion at the AGM, for which more than the
recommended minimum 20 working days’ notice is given.
Details of proxies lodged in respect of the AGM will
be published on the Company’s website as soon as is
practicable following the meeting.
Significant interests in shares are detailed on page 74.
Compliance with the Code
The Board considers that the Company complied with
the provisions of the Code throughout the year, with the
exception of provision B.1.2, as described in section 2 above.
Katie Wood
Company Secretary
26 June 2017
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG REPORT OF THE AUDIT
AND RISK COMMITTEE
Chairman’s introduction
The Audit and Risk Committee has an
important role in ensuring the integrity
of the Group’s financial reporting and
in reviewing the effectiveness of the
Group’s internal control systems and
risk management.
BILL SPENCER I CHAIRMAN
The other area I would like to highlight and
where I believe we have continued to make
good progress is risk management. The
Board’s risk appetite and approach towards
risk is outlined in the Managing risk report
on pages 28 to 33. We have implemented
the recommendations put forward in the
external review conducted in the prior
year and have also reviewed the work of
Group Internal Audit to ensure that this key
function is operating effectively.
I hope you find this report useful and I would
welcome any comments.
Bill Spencer
Chairman of Audit and Risk Committee
26 June 2017
Dear Shareholder,
I am delighted to present to you my first
report as Chairman of the Audit and Risk
Committee since joining the Board in June
2016. The Committee has continued to
follow a detailed program of work. We have
been provided with good quality material to
allow proper consideration to be given to the
Committee’s responsibilities.
The Audit and Risk Committee (the
Committee) has an important role in
ensuring the integrity of the Group’s
financial reporting and reviewing the
effectiveness of the Group’s internal control
systems and risk management.
The report which follows sets out details on
the workings of the Committee, the work
done during the year and the key issues
considered in the preparation of the financial
statements and the related information,
judgements and assurance received.
The key accounting issue considered during
the year continued to be determining
appropriate depreciation rates for our
vehicles. This is an area where significant
judgement is required and the Committee is
satisfied with the rigour applied to this issue.
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25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWGOVERNANCE REPORT OF THE AUDIT
AND RISK COMMITTEE
Role
The role of the Audit and Risk Committee is
set out on page 46.
Membership
The members of the Committee, who are
all non-executive Directors of the Company,
are:
B Spencer (Chairman)
J Caseberry
C Miles
Date of appointment
1 June 2016
10 December 2012
27 November 2015
The Code requires that at least one member
of the Committee should have recent and
relevant financial experience: currently,
the Chairman of the Committee fulfils this
requirement. All members of the Committee
are expected to be financially literate.
Meetings
The Committee is required to meet at least
three times a year. Details of attendance at
meetings held in the year ended 30 April
2017 are given on page 49.
Due to the cyclical nature of its agenda,
which is linked to events in the Group’s
financial calendar, the Committee will
generally meet four times a year. The other
Directors, together with the Group Head of
Internal Audit and the external auditor, are
normally invited to attend all meetings.
Activity
Since May 2016, the Committee has:
| Reviewed the financial statements for the
years ended 30 April 2016 and 2017 and
the half yearly report issued in December
2016. As part of this review process, the
Committee received reports from PwC.
For the full year results this included
making a recommendation to the
Board as to whether the Annual Report
and Accounts were fair, balanced and
understandable;
| Reviewed and agreed the scope of the
audit work to be undertaken by PwC and
agreed their fees;
| Reviewed the effectiveness of the
Group’s system of internal controls;
| Received regular reports from the Head
of Internal Audit;
| Reviewed the progress made by
management in implementing the control
improvements recommended by Internal
Audit;
| Reviewed the Group’s whistleblowing
procedures;
| Reviewed the Group’s depreciation policy
and depreciation rates adopted within
this policy;
| Reviewed the Group’s corporate taxation
arrangements;
| Reviewed the updated external report on
cyber security and the extent to which
recommendations made in the previous
year had been implemented;
| Reviewed the Group’s accounting for
supplier rebate arrangements;
| Reviewed the possible future impact on
the Group’s accounts of new accounting
standards which are scheduled to come
into effect in future years;
Risk management
As part of the Committee’s role to oversee
the Group’s approach to risk management
the Committee has monitored the Group’s
risk management processes and business
continuity procedures.
| Reviewed and approved the Group’s
policy on non-audit fees;
| Reviewed a management paper on the
Group’s investor relations activities,
principally focused on communication
through the annual report;
| Monitored and assessed the Group’s
going concern status and viability
statement made on page 33;
| Reviewed the Group’s Code of Business
Conduct, including the requirements of
the Bribery Act 2010, and the effective
monitoring of the giving and receiving of
gifts and hospitality; and
| Reviewed its own effectiveness and terms
of reference.
This included reviewing the end to end
processes of identifying and reporting risks
and implementing improvements to the
collection of data.
The Committee monitored and reviewed
the activities of the Group’s Internal Audit
function including agreeing the scope
of work to be performed. An external
review was commissioned in the year
and recommendations regarding the
methodology of work to be performed and
reporting have since been implemented.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Significant issues considered
in relation to the financial
statements
During the year the Committee considered,
discussed with the external auditor and
concluded on what the significant risks
and issues were in relation to the financial
statements and how these would be
addressed:
| Determining appropriate
depreciation rates for vehicles
available for hire – in addition to
a monthly review of adjustments to
depreciation when vehicles are sold,
the Committee reviewed formal
papers prepared by management at
each reporting date which included a
qualitative assessment of the current
and forecast trends in the used vehicle
market. After due challenge and debate,
the Committee were content with the
assumptions and judgements made;
| The recoverability of aged trade
receivables – throughout the period,
KPIs are provided. The Committee
ensured that management dedicated
sufficient resources to mitigate bad debt
risk across the Group;
| Provisions for uncertain tax positions
– the Committee reviewed formal
papers prepared by management at
each reporting date which outlined the
Group’s tax positions. The Committee
challenged areas where significant
judgement was taken in order to
determine the level of provisions held in
the balance sheet and was satisfied with
the judgements made; and
| Financial statements – the Committee
considered the presentation of the
Annual Report and Accounts, and
in particular, the analysis between
underlying and statutory disclosures.
We were satisfied with management’s
presentation.
External auditor
The Committee reviews and makes
recommendations with regard to the
appointment of the external auditor.
In making this recommendation, the
Committee considers auditor effectiveness
and independence, partner rotation and any
other factors which may impact upon the
external auditor’s reappointment. PwC was
first appointed in September 2015 and the
Committee supports a proposed resolution
at the AGM in September 2017 to re-appoint
them for a further year.
The Board’s policy on non-audit services
provided by the external auditor, developed
and recommended by the Committee, is:
| Certain audit related work such as the
review of the half year announcement,
being work that, in its capacity as
auditor, it is best placed to carry out
and will generally be asked to do so.
Nevertheless, where appropriate, it will
be asked for a fee quote; and
| Tax compliance, tax advisory and
other non-audit related and general
consultancy work: this type of work
will either be placed on the basis of
the lowest fee quote or to consultants
who are felt to be best able to provide
the expertise and working relationship
required. The external auditor is not
invited to compete for this type of work.
Fees paid and payable to PwC in respect of
the year under review are as shown in Note
5 on page 99.
The Committee reviewed the effectiveness
and independence of the external
auditor, taking into account input from
management, consideration of responses
to questions from the Committee and the
audit findings reported to the Committee.
The Committee also conducted one-to-one
meetings with the audit partner without
management being present. Based on all of
this information, the Committee concluded
that the audit process was operating
effectively. As a result of this the Committee
has recommended to the Board the
reappointment of PwC at the AGM.
Internal Audit
In fulfilling its duty to monitor the
effectiveness of the Internal Audit function,
the Committee has:
| Reviewed the adequacy of the resources
of the Internal Audit department for the
UK, Spain and Ireland;
| Ensured that the Head of Internal Audit
has direct access to the Chairman of
the Board and to all members of the
Committee; and
| Conducted a one-to-one meeting with
the Head of Internal Audit without
management present, approved
the internal audit programme and
reviewed quarterly reports by the Head
of Internal Audit.
The Chairman of the Committee will
be available at the AGM to answer any
questions about the work of the Committee.
Bill Spencer
Chairman of Audit and Risk Committee
26 June 2017
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25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWGOVERNANCE REMUNERATION
REPORT
Chairman’s introduction
Northgate is committed to a
transparent and open dialogue with
shareholders. The objective of
this report is to communicate clearly
the strong link between executive
pay and performance.
JILL CASEBERRY I CHAIRMAN OF THE REMUNERATION COMMITTEE
Dear Shareholder,
On behalf of the Board, I am pleased to
introduce the Directors’ remuneration
report for the year ended 30 April 2017.
The report is divided into three sections,
namely: (i) the annual statement; (ii) the
remuneration policy (which details the
Directors’ remuneration policy which we
will be seeking shareholder approval for at
the forthcoming AGM); and (iii) the annual
remuneration report.
Performance of the Group
FY2017 was a challenging year for the
Company, with increased competition in all
territories. Spain and Ireland grew vehicles
on hire and self-help measures have been
initiated in the UK. Considerable insight of
our growth opportunity has been gained
giving us confidence going forward.
| Underlying profit before tax £75.0m
(2016 – £82.9m)
| Underlying basic earnings per share 47.3p
(2016 – 49.0p);
| Underlying free cash flow generation of
£44.0m (2016 – £48.4m);
| 8% increase in proposed full year
dividend per share to 17.3p (2016 –
16.0p).
Executive change
In January 2017, Bob Contreras left the
business and Kevin Bradshaw was appointed
as CEO. Kevin’s salary, benefits and variable
remuneration opportunities are at the same
level as the former CEO and no ‘buy-out’
payments were made.
The remuneration package will be reviewed
in May 2018 following an assessment of
his performance and a review of market
conditions.
In accordance with Bob Contreras’ Service
Agreement, he is entitled to a payment
in lieu of 12 months notice, subject to
mitigation. In line with our remuneration
policy and good leaver status, Bob must
exercise his deferred bonus shares within
six months of leaving the business. His EPSP
awards will remain subject to performance,
vest pro-rata and on the original dates.
Remuneration policy review
During the course of the last six months the
Remuneration Committee (the Committee)
undertook a full review of the policy, which
will be presented for a binding vote at this
year’s AGM. The objectives of this review
were to ensure that the policy continues to
align with the Group’s strategy, duly reflects
investor best practise, and provides us with
the ability to attract, motivate and retain
high-calibre executive talent.
In developing the proposals for the revised
policy, we have consulted with our major
shareholders, the Investment Association, ISS
and Glass Lewis Governance Services, as well
as taking into account the climate of opinion
on reward and pay for executive directors.
Following the review the Committee
concluded that a small number of minor
changes should be proposed.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Key changes:
| Bringing the CEO annual bonus target
and threshold performance into line with
that for other Directors;
| Introduction of a two-year post vesting
holding period for long term incentive
awards granted from 2017;
| Providing discretion for the Committee
to determine that dividend equivalents
will be paid on deferred bonus or
performance share awards;
| Increase of minimum shareholding level
from 150% of salary to 200% of salary
for both CEO and CFO; and
| Executive Director’s contracts to provide
for equal notice periods for the executive
Director and Company. Normally the
notice period will be six months.
Full details of the proposed changes can be
found on pages 56 to 64.
Overall reward structure
The Committee continues to believe that
the total reward available to its executives
should be competitive for a company of
Northgate’s size, complexity and geography.
In order to ensure strong alignment to the
interests of shareholders, the policy provides
a greater weighting to the variable elements
of remuneration and for a significant
proportion of the remuneration package to
be paid in equity.
Review of remuneration for
2017 and basis for 2018
Base salary
In line with the senior level UK workforce,
no salary increases have been awarded
to the CEO or CFO for the year ending
30 April 2018.
Annual bonus
Annual bonus targets for the year ended
30 April 2017 were based on profit before
tax (75% of maximum opportunity) and
key strategic targets (25% of maximum
opportunity) with a ROCE underpin. As
the profit before tax threshold was not
met, bonus has not been awarded to
Bob Contreras, Kevin Bradshaw or Paddy
Gallagher. Full details of the bonus criteria
and calculations can be found on page 67.
The maximum annual bonus opportunity
and performance metrics for the coming
year are the same as for the year just ended.
Performance targets will be disclosed
retrospectively in next year’s report.
Upon review of the FY2016 bonus paid
to Bob Contreras in July 2016 an error
was identified. This error resulted in an
overpayment of bonus in the sum of
£41,000, split equally between shares and
cash. Subsequently, using the clawback
provisions of the bonus scheme all monies
due have been repaid.
Executive Performance Share Plan
(EPSP)
Vesting of the EPSP award granted on the
27 June 2014 was based on performance
over the three years ended 30 April 2017.
This award was subject to EPS performance
for 60% of the award and ROCE for the
other 40%. The performance achieved has
resulted in 61.8% vesting before pro-rating
for period of service. Further detail regarding
this award can be found on page 67.
For the coming year, EPSP award levels for
the CEO and CFO remain unchanged from
this year and EPS and TSR continue to be
the target metrics. The balance between
these metrics remains 60% on EPS and
40% on TSR compared to the FTSE 250
(excluding Investment Trusts). The EPS target
is set at a level to encourage progressive
and sustainable growth of earnings for
shareholders. Since 2013 there has been a
threshold of CPI + 3% p.a. and a stretch of
CPI + 11% p.a., and these remain the targets
for the coming year’s awards.
Committee changes
During the course of the year Andrew Allner
stepped down from the Committee, as he is
no longer independent, but he continues to
offer wise counsel as he attends meetings
by invitation.
Other items
As previously reported, our depreciation
rates were reduced on 1 May 2012 and
1 May 2014 in the UK and 1 May 2014
in Spain. Where appropriate, when
setting performance targets in future, the
Committee will take this into account. With
regard to outstanding unvested EPSP awards
the Committee has agreed that it will review
the position at the end of the performance
period, for each award, when the exact
impact is known and make any adjustment
it considers appropriate. Any adjustment will
be fully explained in the annual report on
remuneration for the relevant year.
Conclusion
The Committee remains committed to a
remuneration policy and implementation,
which provides the appropriate opportunity
for the executives to be fairly rewarded for
their contribution to the business, aligned
with the interest of all stakeholders.
We value the support that shareholders have
provided in the past, including the 99% vote
given to approve our remuneration report
at the 2016 AGM. Northgate is committed
to a transparent and open dialogue with
shareholders and we look forward to
your continued support at our AGM in
September.
Jill Caseberry
Chairman of the Remuneration Committee
26 June 2017
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25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWGOVERNANCE However, when setting the levels of short-term and long-
term variable remuneration, consideration is given to setting
the right balance between equity and cash so as not to
encourage unnecessary risk taking.
The Committee will seek to ensure that the incentive
structure will not raise ESG risks by inadvertently motivating
irresponsible behaviour and will take account of ESG matters
generally in determining overall remuneration policy
and structure.
REMUNERATION
REPORT
Remuneration Policy Report
This part of the Directors’ remuneration report sets out
the remuneration policy for the Company and has been
prepared in accordance with the Companies Act 2006,
The Large and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013,
the UK Code on Corporate Governance and the UK Listing
Rules. Our Directors’ remuneration policy was approved
by shareholders at our AGM on 18 September 2014 and
became effective from that date. The policy outlined below
is a new policy for the three years from 2017 and will be put
to a binding vote of shareholders at the AGM to be held on
19 September 2017.
How the views of shareholders are taken
into account
The Committee takes seriously the views of its shareholders.
Shareholder feedback received in relation to the AGM each
year, and any other meetings and communications with
shareholders, is considered by the Committee as part of its
annual review of remuneration policy.
When any material changes are proposed to be made to the
remuneration policy, the Committee Chairman will inform
major shareholders and will offer a meeting to discuss
the changes.
If any shareholders raise concerns with regard to
remuneration issues, we would endeavour to understand
and respond to those concerns either by meetings or
correspondence, as appropriate.
Details of votes cast for and against the resolution to
approve last year’s remuneration report and principal matters
discussed with shareholders during the year are provided in
the annual remuneration report.
Consideration of employment conditions
elsewhere in the Group
When setting remuneration policy for the executive Directors
the Committee takes into account the overall approach to
reward for and the pay and employment conditions of other
employees in the Group and salary increases will ordinarily,
in percentage terms, be in line with those of the wider
workforce in the UK. The Committee is also provided with
periodic updates on employee remuneration practices and
trends across the Group which inform the Committee’s
discussions on executive remuneration. The Company does
not formally consult with employees on the Directors’
remuneration policy.
The remuneration policy for Directors
The Committee aims to ensure that executive Directors
are fairly and competitively rewarded for their individual
contributions by means of basic salary, benefits in kind and
pension benefits. High levels of performance are recognised
by annual bonuses and the motivation to achieve the
maximum benefit for shareholders in the future is provided
by the allocation of long term incentives. Only basic salary
is pensionable.
The Committee’s policy is to apply greater weighting
to the variable elements of executive remuneration and
by incentivising the longer term performance of the
Company, to provide greater alignment with the interests
of shareholders.
It is also the Committee’s policy to pay a significant
proportion of the potential remuneration package in equity,
to ensure that executives have a strong ongoing alignment
with shareholders through the Company’s share price
performance.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG The table below summarises the key aspects of the Company’s remuneration policy for its Directors.
Key aspects of the remuneration policy for Directors
Purpose and link to strategy
Operation
Maximum opportunity
BASE SALARY
To recruit and reward executives of a
suitable calibre for the role and duties
required
Reviewed annually by the Committee, taking account of Company performance,
individual performance, changes in responsibility and levels of increase for the
broader UK population.
Reference is also made to remuneration levels within relevant FTSE and industry
comparator companies.
Salary increases for executive Directors will not normally exceed the general
increase for the broader UK employee population but on occasions may need to
recognise, for example, changes in the scale, scope, complexity or responsibility
of the role, and/or specific retention issues, and to allow the base salary of
newly appointed executives to increase in line with their experience and
contribution.
The Committee considers the impact of any basic salary increase on the total
remuneration package.
Details of the outcome of the most recent salary review are provided in the
annual remuneration report.
No change to policy from 2014 vote.
BENEFITS
To provide market competitive benefits to
ensure the wellbeing of executives
The Company typically provides:
| A car or cash allowance in lieu
| Medical insurance
| Death in service benefits
| Critical illness insurance
| Other ancillary benefits, including relocation expenses (as required)
Executive Directors are also entitled to 30 days’ leave per annum.
Reimbursement of all costs associated with reasonable expenses incurred for the
proper performance of the role.
The value of benefits is based on the cost to the Company and is not
pre-determined. It is a relatively small part of the overall value of the total
remuneration package.
Proposed change from 2014 vote
Reimbursement of all costs associated with reasonable expenses incurred for the proper performance of the role.
PENSION
To provide market competitive retirement
benefits
A Company contribution to a Group personal pension plan or provision of cash
allowance in lieu at the request of the individual.
Up to 18% of salary.
No change to policy from 2014 vote.
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Purpose and link to strategy
Operation
Maximum opportunity
Maximum: 150% of salary CEO; 100% of salary other executives.
Target: 50% of maximum.
Threshold: 25% of maximum.
For performance below threshold, no bonus is payable.
ANNUAL BONUS
To encourage and reward delivery of the
Company’s operational objectives and
to provide alignment with shareholders
through the deferred share element
The annual bonus is based on performance against one or more financial
targets. A proportion (not exceeding 25%) may also be based on non-financial
strategic KPIs.
Details of the performance measures and targets (where these are not
considered commercially sensitive) set for the year under review is provided in
the annual report on remuneration.
Up to 100% of salary, half of any bonus earned is paid in shares and any bonus
earned in excess of 100% of salary will be paid entirely in shares, which are
available to executive Directors after three years, ordinarily subject to continued
employment.
The Remuneration Committee has the discretion to determine the payment of
dividend equivalents arising over the period between grant and the vesting date.
These may be paid in cash or shares.
The Remuneration Committee has the discretion to adjust the final outcome
upwards or downwards in the event that an exceptional event outside of the
Directors’ control occurs, which, in the Committee’s opinion, materially affected
the bonus out-turn.
Clawback provisions apply to all participants in the event of a restatement
of the Group’s accounts, error in assessing performance criteria, poor risk
management, misrepresentation or such other exceptional circumstances as the
Committee determines.
Proposed change from 2014 vote
Bringing the opportunity for the CEO at threshold and target performance into line with that for other Directors.
Providing the discretion for the Committee to determine that dividend equivalents will be paid on deferred bonus awards.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Purpose and link to strategy
Operation
Maximum opportunity
The maximum grant limit in the plan rules is 150% of salary (face value of
shares at grant) although exceptionally 250% may be used, e.g. in recruitment.
The normal grant policy is 150% of salary for each executive Director.
25% of the grant vests for threshold performance increasing in a straight line to
100% for maximum performance.
If performance is below threshold for a measure, then the proportion of the
award subject to that measure will lapse.
LONG-TERM INCENTIVES
To encourage and reward delivery of the
Company’s strategic objectives and provide
alignment with shareholders through the
use of shares
Annual awards of performance shares (or nil cost options) to executive Directors.
Awards are granted subject to continued employment and satisfaction of
challenging performance conditions measured over three years.
Between 2010 and 2014 awards were granted subject to both an EPS and a
ROCE performance condition. In 2015, and subsequently, the awards have
been granted subject to both EPS and TSR. Other measures and/or longer
performance periods may be proposed in the future if the Committee feels that
they would better support the Company’s medium or long term objectives. If
the Committee considers that the changes are substantive it will consult with the
Company’s major shareholders prior to making any changes.
Awards will vest, subject to performance, on the third anniversary of grant and
will be subject to an additional two year holding period post vesting, during
which time awarded shares may not be sold (other than for tax).
The terms of the EPSP rules provide the Committee with the discretion to grant
and/or settle all or part of an EPSP award in cash. In practice this discretion
would only be used in exceptional circumstances for executive Directors or to
enable the Company to settle any tax or social security withholding which may
apply.
The Remuneration Committee has the discretion to determine the payment of
dividend equivalents arising over the period between grant and the vesting date.
These may be paid in cash or shares.
Clawback provisions apply to all participants in the event of a restatement
of the Group’s accounts, error in assessing performance criteria, poor risk
management, misrepresentation or such other exceptional circumstances as the
Committee determines.
Proposed change from 2014 vote
Introduction of a post vesting holding period for EPSP awards granted from 2017.
Providing the discretion for the Committee to determine that dividend equivalents will be paid on EPSP awards.
The ability to grant and/or settle all or part of an EPSP award in cash (to be used only in exceptional circumstances for executive Directors or to enable the Company to settle any tax or social security withholding
which may apply).
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Purpose and link to strategy
Operation
Maximum opportunity
ALL EMPLOYEE SHARE SCHEME
All employees including executive Directors
are encouraged to become shareholders
through the operation of an all employee
HMRC approved SIP. The Board believes
that encouraging wider share ownership by
all staff will have longer term benefits for
the Company and for shareholders
No change to policy from 2014 vote.
NON-EXECUTIVE DIRECTOR FEES
To attract and retain a high-calibre
Chairman and non-executive Directors by
offering a market competitive fee level
The SIP has standard terms under which all UK employees can participate. The
rules for this plan were last approved by the shareholders at the 2011 AGM.
The Chairman is paid a single fee for all his responsibilities. The non-executives
are paid a basic fee. The Chairmen of the main Board Committees and the
senior independent Director are paid an additional fee to reflect their extra
responsibilities.
The level of these fees is reviewed every two to three years by the Committee
and CEO for the Chairman and by the Chairman and executive Directors for the
non-executive Directors within the overall limit set by the Articles of Association
and with reference to market levels in comparably sized FTSE companies, time
commitment and responsibilities of the non-executive Directors. Fees are paid
in cash.
Reimbursement of all costs associated with reasonable expenses incurred for the
proper performance of the role.
Proposed change from 2014 vote
Reimbursement of all costs associated with reasonable expenses incurred for the proper performance of the role.
Employees can elect to contribute up to a maximum amount determined by the
Company and within the statutory limits for SIPs per month from pre-tax salary
which is used to buy shares in the Company. The Company may in addition
make an award of free Matching shares at a ratio not exceeding the statutory
limit for SIPs.
The Company may also make awards of free shares to all employees including
executive Directors, on an equal basis. The maximum award would not exceed
the maximum limit for SIPs.
The maximum aggregate amount is currently £700,000 as provided in the
Articles of Association.
Details of the outcome of the most recent fee review are provided in the annual
report on remuneration.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Choice of performance measures and
approach to target setting
The annual bonus is based on performance against one or
more financial measures and may also include an element
of non-financial strategic KPIs if the Committee feels it
appropriate, all based on the priorities for the business in the
year ahead. The Committee will set stretching performance
targets taking into account market and investor expectations,
prevailing market conditions and the Company’s business
plan for the year.
The Committee may also set an overarching financial hurdle,
for example and depending on the actual metrics set, ROCE
or budgeted operating profit of the Group (or another
appropriate measure) for the year, which, if not achieved,
would result in no bonus being awarded, regardless of
performance against the set targets.
Awards under the EPSP will be based on performance
against one or more financial measures. The measures since
2015 have been EPS and TSR. The Committee has selected
these measures to closely reflect the importance the Board
places on profitability and balance sheet management. The
Committee considers EPS and TSR are the most appropriate
measures at the time of setting this executive Directors’
Remuneration Policy since they incentivise the executives
to both improve the earnings profile of the Group and
manage balance sheet efficiency (important for a capital
intensive business), both of which should flow through to
superior returns for shareholders. The Committee will review
the choice of performance measures and set appropriately
challenging targets prior to each award being made based
on market conditions and the Company’s long term priorities
and business plan at that time. The targets for outstanding
awards are set out in the annual report on remuneration.
Annual bonus plan and share plan policy
The Committee will operate the DABP, EPSP and SIP
according to the rules of each respective plan and consistent
with normal market practice and the Listing Rules, including
flexibility in a number of regards. Factors over which the
Committee will retain flexibility include (albeit with quantum
and performance targets restricted to the descriptions
detailed above):
| Who participates in the plans;
| When to make awards and payments;
| How to determine the size of an award, a payment, or
when and how much of an award should vest;
| How to deal with a change of control or restructuring of
the Group;
| Other than in the case of stated good leaver reasons
whether a Director is a good/bad leaver for incentive plan
purposes and whether and what proportion of awards
vest at the time of leaving or at the original vesting date(s)
as relevant;
| How and whether an award may be adjusted in certain
circumstances (e.g. for a rights issue, a corporate
restructuring or for special dividends); and
| What the weighting, measures and targets should be for
the annual bonus plan and EPSP from year to year.
The Committee also retains the discretion within the policy
to adjust targets and/or set different measures and alter
weightings for the annual bonus plan and to adjust targets
for the EPSP if events happen that cause it to determine that
the conditions are unable to fulfil their original intended
purpose provided that they are not in all the circumstances
considered by the Committee to be materially less difficult
to satisfy.
All historic awards that were granted under any current
or previous share schemes operated by the Company but
remain outstanding (detailed on page 70 of the annual
report on remuneration), remain eligible to vest based on
their original award terms.
It is proposed that the Committee be provided discretion to
enable that dividend equivalents be paid on DABP and EPSP
awards from date of grant to vesting.
Share ownership requirements
It is proposed that executive Directors are required to
accumulate, over a period of five years from the date of
appointment, a holding of Ordinary shares of the Company
equivalent in value to 200% of their basic annual salary,
measured annually. It is intended that this should be
achieved primarily through the exercise of share incentive
awards and that Directors are not required to go into the
market to purchase shares, although any shares so acquired
would count towards meeting the guidelines. Executive
Directors are required to retain all vested DABP and EPSP
awards on vesting, subject to sales to meet tax obligations,
and the Remuneration Committee’s discretion in exceptional
circumstances until the ownership requirement is met.
Differences in remuneration policy
for executive Directors compared to
other employees
The remuneration policy for the executive Directors is
designed with regard to the policy for employees across the
Group as a whole. For example, the Committee takes into
account the general basic salary increase for the broader
UK employee population when determining the annual
salary review for the executive Directors. There are some
differences in the structure of the remuneration policy for
the executive Directors and other senior employees, which
the Remuneration Committee believes are necessary to
reflect the different levels of responsibility of employees
across the Company. The key differences in remuneration
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policy between the executive Directors and employees across
the Group are the increased emphasis on performance
related pay and the inclusion of a significant share based
long term incentive plan for executive Directors. Long
term incentives are not provided outside of the most
senior executives as they are reserved for those considered
as having the greatest potential to influence Group
performance.
In accordance with best practice it is proposed that the
executive Directors are required to hold any awards under
EPSP for two years following vesting.
External non-executive Director positions
Subject to Board approval, executive Directors will normally
be permitted to take on one non-executive position with
another company. In line with best practice it is proposed
that the Director will normally be permitted to retain
their fees in respect of such positions. Details of outside
directorships held by the executive Directors, if any, and
any fees that they received are provided in the Annual
Remuneration Report.
Approach to recruitment and promotions
The remuneration package for a new Director would be set
in accordance with the terms of the Company’s approved
Remuneration Policy in force at the time of appointment.
Currently, for an executive Director, this would facilitate
awards of no more than 150% of salary per annum for each
of the DABP and EPSP, although exceptionally an EPSP award
of up to 250% may be made.
The salary for a new executive, particularly one with no
experience at listed company main board level, may be set
below the normal market rate, with phased increases over
the first few years as the executive gains experience in their
new role.
The Committee may offer additional cash and/or share-
based elements when it considers these to be in the best
interests of the Company and its shareholders to take
account of remuneration relinquished when leaving the
former employer and would reflect (as far as possible) the
nature and time horizons attaching to that remuneration and
the impact of any performance conditions.
For an internal executive appointment, any variable pay
element awarded in respect of the prior role will be
allowed to pay out according to its terms. In addition, any
other ongoing remuneration obligations existing prior to
appointment may continue, if relevant.
For external and internal executive appointments, the
Committee may agree that the Company will meet certain
relocation and other incidental expenses as appropriate.
For the appointment of a new Chairman or non-executive
Director, the fee arrangement would be set in accordance
with the approved remuneration policy in force at that time.
Service contracts and payments for
loss of office
The Remuneration Committee reviews the contractual terms
for new executive Directors to ensure that these reflect best
practice.
Service contracts normally continue until the Director’s
agreed retirement date or such other date as the parties
agree. The service contracts contain provision for early
termination. Notice periods given by the employing
company are limited to 12 months or less. In line with
best practice it is proposed that equal notice periods will
apply to the executive Directors and the Company and that
these will normally be six months, although in exceptional
circumstances a notice period may be agreed of up to a
maximum of 12 months.
An executive Director’s service contract may be terminated
without notice and without any further payment or
compensation, except for sums accrued up to the date of
termination, on the occurrence of certain events such as
gross misconduct. If the employing company terminates the
employment of an executive Director in other circumstances,
compensation is limited to salary due for any unexpired
notice period and any amount assessed by the Committee
as representing the value of other contractual benefits
(including pension) which would have been received
during the period. In the event of a change of control of
the Company there is no enhancement to contractual
terms. Service contracts are available for inspection at the
Company’s registered office.
In circumstances in which a departing Director may be
entitled to pursue a legal claim, the Company may negotiate
settlement terms and, with the approval of the Committee
on the remuneration elements therein, enter into a
settlement agreement accordingly.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG In summary, the proposed contractual provisions are as follows:
Provision
Detailed terms
Notice period
Current executive Directors: six months from the executive and six months from the Company.
Any future executive Directors: normally a six months’ notice from both the Company and the
Director (up to a maximum of 12 months in exceptional circumstances).
Termination payment
Base salary plus benefits (including pension), subject to mitigation and paid on a phased basis
for notice period.
In addition, any statutory entitlements or sums to settle or compromise claims in connection
with the termination would be paid as necessary.
Remuneration
entitlements
A pro rata bonus may also become payable for the period of active service along with vesting
for outstanding share awards (in certain circumstances – see below).
In all cases performance targets would apply.
Change of control
There are no enhanced terms in relation to a change of control.
Any share based entitlements granted to an executive
Director under the Company’s share plans will be determined
based on the relevant plan rules. The default treatment
is that any outstanding awards lapse on cessation of
employment. However, in certain prescribed circumstances,
such as death, ill health, redundancy, transfer of the
employee’s employing business out of the Group or other
circumstances at the discretion of the Committee (taking into
account the individual’s performance and the reasons for
their departure), ‘good leaver’ status can be applied. Under
the EPSP, awards held by good leavers will usually be scaled
back for the actual period of service and vest at the date
of cessation although the Committee has the discretion to
not scale back if it considers this is appropriate and also to
determine that vesting should be at the usual time. DABP
awards held by good leavers will usually vest on cessation
or if the Committee determines at the usual vesting date.
For share awards under the EPSP and held by good leavers,
awards remain subject to the performance conditions.
For all leavers, the Committee may also determine to
make a payment in reimbursement of a reasonable level of
outplacement and legal fees in connection with a settlement
agreement as well as any statutory entitlement.
All non-executive Directors have letters of appointment with
the Company for an initial period of three years, subject
to annual reappointment at the AGM. The Chairman’s
appointment may be terminated by the Company with one
month’s notice. The appointment of the other non-executive
Directors is terminable without notice. The appointment
letters for the Chairman and non-executive Directors provide
that no compensation is payable on termination, other than
accrued fees and expenses.
Legacy arrangements
For the avoidance of doubt, in approving this remuneration
policy, authority is given to the Company to honour any
commitments entered into with current or former Directors
(such as the payment of a pension or the vesting of share
awards) that have been disclosed to shareholders in
previous remuneration reports. Details of any payments
to former Directors will be set out in the annual report on
remuneration as they arise.
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Reward scenarios
The Company’s policy results in a significant portion
of remuneration received by executive Directors being
dependent on Company performance. The chart opposite
illustrates how the total pay opportunities for the executive
Directors vary under three different performance scenarios:
maximum, on-target and fixed pay only. These charts are
indicative as share price movement and dividend accrual
have been excluded. All assumptions made are noted below
the chart.
Executive Director total remuneration at different levels of performance
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
)
s
0
0
0
£
(
n
o
i
t
a
r
e
n
u
m
e
R
£1,726
35%
£1,114
27%
£502
27%
35%
£402
100%
Minimum
45%
Target
CEO
29%
100%
Maximum
Minimum
£1,214
40%
27%
33%
Maximum
£808
30%
20%
50%
Target
CFO
Fixed pay
Annual bonus
Long-term incentives
Fixed pay
Annual bonus
Long-term incentives
Assumptions:
Fixed Pay = salary + benefits + pension
On-target = Fixed plus 50% vesting of the EPSP awards and 50% of the annual bonus opportunity
Maximum = Fixed plus 100% of the annual bonus opportunity and 100% of the EPSP awards
Salary levels (on which other elements of the package are calculated) are based on those applying on 1 May 2017. The value
of taxable benefits is based on the cost of supplying those benefits (as disclosed) for the year ending 30 April 2018.
The executive Directors can participate in the SIP on the same basis as other employees. The value that may be received under
this scheme is subject to tax approved limits. For simplicity and because of uncertainty over the value that may be received
from participating in this scheme, it has been excluded from the above charts.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG
REMUNERATION
REPORT
Annual Report on Remuneration
The Remuneration Committee
The members of the Committee are listed below. All are
independent non-executive Directors, as defined in the
UK Corporate Governance Code, with the exception of
the Group Chairman, A Page, who was independent on
appointment.
The members of the Committee during the last financial year
and their attendance at the meetings of the Committee were:
J Caseberry (Chairman)
AJ Allner1
A Page
B Spencer
C Miles
Number of
meetings
attended out
of potential
maximum
4 out of 4
1 out of 4
4 out of 4
4 out of 4
4 out of 4
1 AJ Allner stepped down as a Committee member at the AGM
in September 2016. He attended one meeting as a Committee
member, the remainder he has attended by invitation.
The CEO attends meetings by invitation and assists the
Committee in its deliberations, except when issues relating
to his remuneration are discussed. No Directors are involved
in deciding their own remuneration. The Company Secretary
acts as Secretary to the Committee.
The Committee is advised by NBS, which was first appointed
by the Committee in 2003. NBS advises the Committee
on executive remuneration matters including topical
remuneration issues which are of particular relevance to
the Company, on incentive arrangements for the Directors
and senior staff, on all employee share plans and on
remuneration reporting and compliance matters. NBS liaises
with the Committee Chairman and Company Secretary and
considers how best it can work with the Company to meet
the Committee’s needs.
The total fees paid to NBS in respect of its services to the
Committee during the year were £32,708 (2016 – £29,947).
The fees are predominantly charged on a ‘time spent’ basis.
NBS is a signatory to the Remuneration Consultants’ Code of
Conduct. Neither NBS nor Aon plc overall provide any other
services to the Company and the Committee is satisfied that
the advice that it receives is objective and independent.
The Committee’s terms of reference are available on the
Company’s website. www.northgateplc.com
The Committee is responsible for making recommendations
to the Board on the remuneration packages and terms and
conditions of employment of the Chairman and the executive
Directors of the Company as well as the Company Secretary.
The senior executives below Board level in the UK, Spain
and Ireland, also have a significant influence on the ability of
the Company to achieve its goals. Accordingly, in addition
to setting the remuneration of the executive Directors, the
Committee also reviews the remuneration for these senior
employees to ensure that their rewards are competitive with
the market and that they are appropriate relative to the
Board and employees generally. The Committee also reviews
remuneration policy generally throughout the Group.
6564
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWGOVERNANCE REMUNERATION
REPORT
Annual Report on Remuneration
CONTINUED
Remuneration for the year ended 30 April 2017 (audited)
The table below sets out the remuneration received by the Directors in relation to performance in the year ended 30 April
2017 (or for performance periods ending in the year ended 30 April 2017 in respect of long term incentives) and in the year
ended 30 April 2016.
1 Kevin Bradshaw was appointed to the Board on 11 January 2017.
2 Bob Contreras retired from the Board on 11 January 2017.
3 Paddy Gallagher was appointed to the Board on 22 February 2016.
4 Bill Spencer was appointed to the Board on 1 June 2016.
5 Claire Miles was appointed to the Board on 27 November 2015.
£000
Executive
Directors
K Bradshaw1
RL Contreras2
PJ Gallagher3
Chairman
A Page
Non-executive
Directors
AJ Allner
B Spencer4
J Caseberry
C Miles5
Salary
& Fees
Taxable
Benefits6
Annual
Bonus
Long Term
incentive7
Pension8
Other9
Loss of
Office
Total
6 Taxable Benefits:
2017
2017
2016
2017
2016
2017
2016
2017
2016
2017
2017
2016
2017
2016
125
284
408
325
62
163
138
63
71
62
65
65
55
28
7
14
7
18
5
–
–
–
–
–
–
–
–
–
–
–
208
–
16
–
–
–
–
–
–
–
–
–
–
355
438
–
–
–
–
–
–
–
–
–
–
–
23
51
73
59
10
–
–
–
–
–
–
–
–
–
–
3
4
–
–
–
–
–
–
–
–
–
–
–
–
166
–
–
–
–
–
–
–
–
–
–
–
–
155
873
1,138
402
93
163
138
63
71
62
65
65
55
28
Car
Medical insurance
K Bradshaw
£000
6
1
RL
Contreras
£000
13
1
PJ Gallagher
£000
17
1
7 This relates to the 2014 EPSP award, details of which are given on
page 67. The value of the options vesting in respect of FY2016
shown in last year’s accounts of £505,000 was valued at the
average closing share price over the last three months of that
financial year of 385p per share. They have been restated using
the actual share price on that date of vesting (9 July 2016) of 334p.
The options vesting in respect of FY2017 are valued at the average
closing price over the last three months of FY2017 of 543p.
8 The executive Directors are eligible for membership of a Group
personal pension plan under which they are entitled to a
contribution from the Company of 18% of basic salary. In view of
the Annual Allowance cap, part or all of their entitlements were
paid to them in cash.
9 This represents the value of Matching shares awarded under the
SIP which have fully vested in the year (i.e. they are no longer
subject to forfeiture), valued at the market price on the date of
vesting.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG
In accordance with Bob Contreras’ Service Agreement and
his agreement with the Company relating to the termination
of his employment, following the Termination Date (11
January 2017) Bob is entitled to receive a payment in lieu of
his 12 month notice period. This payment is to be made in
equal monthly instalments with any remuneration received
during the 12 months following the Termination Date being
offset against the monthly amount being paid to him by
the Company, excluding the remuneration received by
him from Speedy Hire Plc as a non-executive Director. His
salary and benefits at Northgate as at the Termination Date
equated to £499,320 per annum. The total amount paid
in this financial year after he ceased to be a Director was
therefore £195,746. Upon review an error in the calculation
of the FY2016 bonus paid to Bob Contreras in July 2016 was
identified. This error resulted in an overpayment of bonus in
the sum of £41,000, split equally between shares and cash.
Subsequently, using the clawback provisions of the
bonus scheme all monies due have been repaid from the
monthly installments of the pay in lieu of notice in May and
June 2017.
Kevin Bradshaw was appointed to the Board on 11 January
2017 at a basic salary of £408,000 per annum, which
will be reviewed in May 2018 following an assessment
of performance and a review of market conditions. His
maximum annual bonus potential is 150% of basic salary
and his maximum annual award level under the EPSP
is 150% of salary. There was no buyout of incentive
arrangements from his previous employer.
Annual bonus for the year ended 30 April 2017 (audited)
Deferred annual bonus plan
The bonus for the executive Directors in respect of the year under review was based as to 75% on Group PBT and 25% on
strategic objectives, with a ROCE underpin below which no bonus would be payable, and a minimum PBT threshold. For the
year ended 30 April 2017, the PBT threshold of £76.0m was not met and no bonus has been paid to any executive Directors.
Vesting of EPSP awards
The EPSP award granted on 27 June 2014 was based on performance over the three years ended 30 April 2017. As disclosed
in previous annual reports, the performance condition for this award was as follows:
Performance Condition
EPS
(60% of award)
ROCE
(40% of award)
Threshold target
(25% Vesting)*
35.1p+
(CPI +3% p.a.)
= 39.1p
11.7%
End
measurement
Stretch target
point
(100% Vesting)*
Final year of the
35.1p+
performance
(CPI +11% p.a.)
= 48.3p
period
12.6% Average of the
3 years of the
performance
period
Actual
47.3p
Adjusted*
45.9p
% Vesting
80.8
11.9%
11.8%
33.3
* As indicated in last year’s report, the EPS and ROCE targets and out-turns have been adjusted to reflect the changes in vehicle depreciation
rates which were not envisaged when the targets were originally set.
The resulting vesting position will therefore be:
RL Contreras
Original award*
(shares)
117,647
Total vesting
%
61.8
Pro rating
%
90.0(1)
Total shares
vesting
65,469
Note 1: The number of shares vesting to Bob Contreras has been pro rated for time to reflect his period of service with the Company relative to
the performance period – 986 out of 1,095 days.
6766
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWGOVERNANCE REMUNERATION
REPORT
Annual Report on Remuneration
CONTINUED
EPSP awards made during the year (audited)
The following EPSP awards were granted to executive Directors during the year:
K Bradshaw2
RL Contreras3
PJ Gallagher
Type of
award
Nil cost
option
Nil cost
option
Nil cost
option
Basis of
award
granted
150% of
salary of
£408,000
150% of
salary of
£408,000
150% of
salary of
£325,000
Share price
at date of
award1
510p
Number of
shares over
which award
was granted
36,107
Face
value of
award (£)
184,146
316p
193,364
611,997
% of face
value that
would vest
on threshold
performance
Vesting
determined by
performance
over
25% Three financial
years to
30 April 2019
As above
25%
316p
154,028
487,499
25%
As above
1 Grants made to Bob Contreras and Paddy Gallagher on 18 July 2016. Share price at 30 June 2016, being the date of the Preliminary
Announcement of the results for FY2016. Grant made to Kevin Bradshaw on 26 January 2017 and share price at date award was made.
2 The award was pro rated for time to reflect the start date and awarded on 18 January 2017. The original grant was made over an excess
number of shares (47,597). A deed of surrender in respect of the excess was executed and this excess lapsed.
3 The number of shares vesting to Bob Contreras will be pro rated for time to reflect his period of service with the Company relative to the
performance period – 8 out of 36 months.
This award is subject to EPS and TSR targets as follows:
Performance condition
EPS (60% of award)
TSR (40% of award)
Threshold target
(25% vesting)
Stretch target
(100% vesting)
49.0 p+ (CPI+3% p.a.)
49.0 p+ (CPI+11%p.a.)
Median
Upper quartile
End measurement point
Final year of the performance
period relative to FTSE 250
(excl. investment trusts)
over the performance period.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Percentage change in remuneration levels
Total shareholder return (TSR)
2016
2017
% change
408
16
209
CEO (£000)1
– salary
– benefits
– bonus
Average per UK employee (£)
– salary
– benefits
– bonus
24,640
1,691
383
408
21
–
25,676
1,570
817
0
31
(100)
4
(7)
113
The CEO’s figure is calculated as the combined salary and benefits of
Bob Contreras and Kevin Bradshaw. This shows the movement
in the salary, benefits and annual bonus for the CEO
between the year under review and the previous financial
year compared to that for the average UK employee. The
Committee has chosen this comparator as it feels that it
provides a more appropriate reflection of the earnings of
the average worker than the movement in the Group’s total
wage bill, which is distorted by movements in the number of
employees and variations in wage practices in Spain.
Performance graph measured by TSR
As required by the Regulations, the graph below illustrates the
performance of Northgate plc measured by Total Shareholder
Return (share price growth plus dividends paid) against a
‘broad equity market index’ over the last eight years. As the
Company has been a constituent of the FTSE 250 index for
the majority of that time, that index (excluding investment
companies) is considered to be the most appropriate
benchmark. The mid-market price of the Company’s Ordinary
shares at 28 April 2017 was 535p (30 April 2016 – 403p). The
range during the year was 323p to 645p.
The chart opposite shows the Company’s TSR performance
against the performance of the FTSE 250 index from 30 April
2009 to 30 April 2017.
)
£
(
e
u
a
V
l
350
300
250
200
150
100
50
0
30-Apr-09
30-Apr-10
30-Apr-11
30-Apr-12
30-Apr-13
30-Apr-14
30-Apr-15
30-Apr-16
30-Apr-17
Northgate plc
FTSE 250 (Excl. Inv. Trusts) Index
FTSE SmallCap (Excl. Inv. Trusts)
This graph shows the value, at 30 April 2017, of £100 invested in Northgate plc on 30 April 2009, compared with the value
of £100 invested in the FTSE 250 (Excl. Inv. Trusts) and FTSE SmallCap (Excl. Inv. Trusts) Indices on the same date. The other
points plotted are the values at intervening financial year-ends.
Total remuneration for CEO
Year ended 30 April
Total Remuneration (£000)
Annual bonus (% of maximum)
Long term incentive vesting (% of maximum)
2011
821
2012
1,115
100% 100%
0% 100% 33.3%
2014
628
2015
1,138
2013
2016
1,214
859
0% 43.6% 90.3% 34.1%
2017
821
0%
0% 47.9% 79.2% 61.8%
This shows the total remuneration figure for the CEO during each of those financial years. The total remuneration figure
includes the annual bonus and EPSP awards which vested based on performance periods ending in those years. The annual
bonus and EPSP percentages show the payout for each year as a percentage of the maximum. In years when there was a
change of CEO, the figures shown are the aggregate for the office holders during that year.
Relative importance of spend on pay
Staff costs
Dividends
The table above shows the movement in spend on staff costs versus that in dividends.
2016
89,368
20,139
2017
93,850
21,875
% increase
5.0
8.6
6968
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWGOVERNANCE
REMUNERATION
REPORT
Annual Report on Remuneration
CONTINUED
Outstanding share awards
The tables below set out details of executive Directors’ outstanding share awards.
K Bradshaw (audited)
Scheme
EPSP
Grant
date
26.01.17
Exercise
price (p)
Nil
Number of
shares at
1 May
2016
–
Granted
during
year
36,107
Vested
during
year
–
Exercised
during
year
–
Lapsed
during
year
–
Number of
shares at
30 April
2017
36,107
End of
performance
period
30.04.19
Vesting
date
26.01.20
Exercise period
26.01.20 – 26.01.27
The original grant was made over an excess number of shares (47,597). A deed of surrender in respect of the excess was executed and this excess lapsed.
RL Contreras (audited)
Scheme
EPSP
EPSP
EPSP
EPSP
EPSP
DABP
DABP
DABP
DABP
DABP
DABP
DABP
Grant
date
17.08.12
09.07.13
27.06.14
20.07.15
18.07.16
30.08.11
30.08.11
30.08.11
20.07.12
11.07.14
20.07.15
18.07.16
PJ Gallagher (audited)
Scheme
EPSP
DABP
DABP
Grant
date
18.07.16
18.07.16
18.07.16
Exercise
price (p)
Nil
Nil
Nil
Nil
Nil
Nil
327.9
Nil
Nil
Nil
Nil
Nil
Exercise
price (p)
Nil
Nil
317
Number of
shares at
1 May
2016
128,917
165,684
117,647
–
–
9,1492
9,1493
44,2201
78,9471
16,0251
59,4781
–
Number of
shares at
1 May
2016
–
–
–
1 Deferred Award.
2 Linked Deferred Award with a capped value of £30,000.
3 Approved Option.
Granted
during
year
–
–
–
106,434
193,364
–
–
–
–
–
–
32,9681
Granted
during
year
154,028
2,5262
2,5263
Vested
during
year
–
–
–
–
–
–
–
–
–
–
–
–
Vested
during
year
–
–
–
Exercised
during
year
128,917
131,138
–
–
–
9,149
9,149
44,220
78,947
16,025
59,478
–
Exercised
during
year
–
–
–
Lapsed
during
year
–
34,546
–
–
–
–
–
–
–
–
–
–
Number of
shares at
30 April
2017
–
–
117,647
106,434
193,364
–
–
–
–
–
–
32,968
End of
performance
period
30.04.15
30.04.16
30.04.17
30.04.18
30.04.19
–
–
–
–
–
–
–
Lapsed
during
year
–
–
–
Number of
shares at
30 April
2017
154,028
2,526
2,526
End of
performance
period
30.04.19
–
–
Vesting
date
17.08.15
09.07.16
27.06.17
20.07.18
18.07.19
30.08.14
30.08.14
30.08.14
20.07.15
11.07.17
20.07.18
18.07.19
Exercise period
17.08.15 – 17.08.22
09.07.16 – 09.07.23
27.06.17 – 27.06.24
20.07.18 – 20.07.25
18.07.19 – 18.07.26
30.08.14 – 30.08.21
30.08.14 – 30.08.21
30.08.14 – 30.08.21
20.07.15 – 20.07.22
11.07.17 – 11.07.24
20.07.18 – 20.07.25
18.07.19 – 18.07.26
Vesting
date
18.07.19
18.07.19
18.07.19
Exercise period
18.07.19 – 18.07.26
18.07.19 – 18.07.26
18.07.19 – 18.07.26
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG The share price at 30 April 2017 was 535p.
DABP: Awards can be granted in two forms: (i) a Nil Cost
Option over a number of shares (a ‘Deferred Award’) or
(ii) a Nil Cost Option over a fixed value of shares (a ‘Linked
Deferred Award’) granted in association with an HMRC
Approved Option (an ’Approved Option’). The face value
of Approved Options held at any one time may not exceed
£30,000. The value of a Linked Deferred Award is capped at
the original face value. Related Linked Deferred Awards and
Approved Options must be exercised at the same time unless
the Approved Option is ‘underwater’ and therefore lapses.
As an eligible leaver, Bob Contreras will be permitted to
exercise all outstanding vested and unvested DABP awards
for up to six months from his termination date, 11 January
2017. Similarly, he will be permitted to exercise all vested but
unexercised EPSP awards over the same period. Unvested
EPSP awards will be considered for release, subject to the
applicable performance conditions and pro rated for time,
on the scheduled vesting dates.
SIP
The SIP, which is approved by HMRC under Schedule 8
Finance Act 2000, was introduced in 2000 to provide
employees at all levels with the opportunity to acquire shares
in the Company on preferential terms. The Board believes
that encouraging wider share ownership by all staff will have
longer term benefits for the Company and for shareholders.
The SIP operates under a trust deed, the Trustees being
Capita IRG Trustees Limited (the Capita Trust).
To participate in the SIP, which operates on a yearly cycle,
employees are required to make regular monthly savings
(on which tax relief is obtained), by deduction from pay, for
a year at the end of which these payments are used to buy
shares in the Company (Partnership shares).
For each Partnership share acquired, the employee will
receive one additional free share (Matching shares). Matching
shares will normally be forfeited if, within three years of
acquiring the Partnership shares, the employee either sells
the Partnership shares or leaves the Group. After this three
year period Partnership and Matching shares may be sold,
although there are significant tax incentives to continue
holding the shares in the scheme for a further two years.
Those employees who are most committed to the Group will
therefore receive the most benefit.
The sixteenth annual cycle ended in December 2016 and
resulted in 509 employees acquiring 118,306 Partnership
shares at 393.5p each and being allocated the same number
of Matching shares. As at 30 April 2017 the Capita Trust
held 1,386,214 Ordinary shares that have been allocated to
employees from the first 16 cycles.
The seventeenth annual cycle started in January 2017 and
currently some 600 employees are making contributions to
the scheme at an annualised rate of £577,710.
During the year, an award of 155 free shares was made to all
eligible employees with one year’s service. The total number
of shares awarded was 223,355.
The executive Directors are entitled to participate in this
scheme and to receive both Matching and Free shares.
Sourcing of shares
Shares to satisfy the requirements of the Group’s existing
share schemes are currently sourced as follows:
DABP and MPSP
To date, awards under these two schemes have been
satisfied through open market purchases by an employee
benefit trust based in Guernsey (the Guernsey Trust). During
the year 200,000 (2016 – 600,000) Ordinary shares were
purchased by the Guernsey Trust and 305,507 (2016 –
345,967) were used to satisfy the exercise of awards under
the DABP and MPSP. At 30 April 2017 the Guernsey Trust
held 708,221 (2016 – 1,899,747) Ordinary shares as a hedge
against the Group’s obligations under these schemes.
The rules of both these schemes also allow new issue and
treasury shares to be used to satisfy the vesting and exercise
of awards, but to date the Board has chosen not to do so.
EPSP
Shares to satisfy the vesting of awards under the EPSP may
be sourced either from new issue or through open market
purchases. To date, all exercises have been satisfied by open
market purchase.
SIP
Awards may be satisfied either by new issue or market
purchase or by a combination of the two. The total number
of shares required to satisfy the allocation made in January
2017 was 236,612 (2016 – 230,532), of which 164,055
were transferred from the Guernsey Trust, with the balance
of 72,557 (2016 – 80,432) being shares already held by the
Capita Trust from forfeiture during the year. The 223,355
free shares referred to above were also sourced from the
Guernsey Trust.
At 30 April 2017 the Capita Trust held 31,479 (2016 –
17,186) Ordinary shares which had been forfeited as a result
of early withdrawals post January 2017.
Overall plan limits and clawback
All the above schemes operate within the following limits: in
any ten calendar year period, the Company may not issue (or
grant rights to issue) more than:
a. 10% of the issued Ordinary share capital under all the
share plans; and
b. 5% of the issued Ordinary share capital under the
executive share plans (EPSP, DABP and MPSP).
The dilution position as at 30 April 2017 was 0.90% under
the EPSP, MPSP and DABP and 1.34% under all schemes.
In line with current best practice guidelines, the Committee
has introduced recovery provisions into the rules of all
discretionary schemes, which can be invoked in the event of
a number of situations including error, financial misstatement
or gross misconduct and which apply to all awards made
from 2010 onwards.
The clawback mechanism was used in relation to Bob
Contreras’ FY2016 bonus as detailed on page 67.
7170
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWGOVERNANCE REMUNERATION
REPORT
Annual Report on Remuneration
CONTINUED
Directors’ shareholding and share interests
The executive Directors are required to build up a
shareholding equivalent to 150% of salary, to be achieved
primarily through the retention, after tax, of share options
exercised under the long term incentive share plans, until
such time as their share ownership target has been met.
Directors are not required to go into the market to purchase
shares, although any shares so acquired would count
towards meeting the guidelines. It is proposed that the
minimum shareholding increases to 200% of salary for the
next and future financial years. This proposal is set out as an
amendment to the remuneration policy.
The Chairman and non-executive Directors are not subject
to a formal shareholding guideline. Details of the Directors’
interests in shares are shown in the table opposite:
Share Interests (audited)
RL Contreras
K Bradshaw
PJ Gallagher
A Page
AJ Allner
J Caseberry
C Miles
B Spencer
Beneficially
owned at 30
April 2017
–
–
–
10,000
13,090
5,000
–
8,000
Vested but
not exercised
EPSP
–
–
–
–
–
–
–
–
Not vested
EPSP
417,445
36,107
154,028
–
–
–
–
–
Vested but
not exercised
DABP
–
–
–
–
–
–
–
–
%
shareholding
guideline
achieved at
30 April 2017
–
–
–
N/A
N/A
N/A
N/A
N/A
Not vested
DABP
–
–
2,526
–
–
–
–
–
No changes in the above interests have occurred between 30 April 2017 and the date of this report.
Remuneration for FY2018
Salaries as at 1 May 2017 are as follows:
K Bradshaw
PJ Gallagher
Salary as at
1 May 2016
£408,000(1)
£325,000
Salary as at
1 May 2017
£408,000
£325,000
Increase
0%
0%
1 On appointment.
In line with senior UK staff, no increases were made to the
executive Directors’ salaries at 1 May 2017.
Fees for the Chairman and
non-executive Directors
As detailed in the remuneration policy, the Company’s
approach to setting non-executive Directors’ remuneration
is with reference to market levels in comparably sized FTSE
companies, levels of responsibility and time commitments.
A summary of current fees is as follows:
Chairman
Base fee
Senior
Independent
Director
Audit Committee
Chairman
Remuneration
Committee
Chairman
Salary as at
1 May 2016
£163,200
£55,000
Salary as at
1 May 2017
£163,200
£55,000
Increase
0%
0%
£10,000
£10,000
£10,000
£10,000
0%
0%
£10,000
£10,000
0%
Fees were last reviewed at 1 May 2017.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Performance targets for the annual bonus and EPSP awards to be granted in 2017
For 2017, the annual bonus will be based on 75% PBT and a range of strategic and operational objectives for the remaining
25%, with a ROCE underpin.
The Committee has chosen not to disclose, in advance, the performance targets for the annual bonus for the forthcoming
year as these include items which the Committee considers commercially sensitive. Full retrospective disclosure of the targets
and performance against them will be seen in next year’s annual report on remuneration.
The EPSP awards to be granted in 2017 will be subject to two separate performance conditions, with EPS accounting for 60%
of the award and TSR compared to the FTSE 250 (Excluding Investment Trusts) Index of Companies for the remaining 40%.
The performance conditions are as follows with intermediate vesting between the threshold and stretch targets:
Performance condition
EPS (60% of award)
Threshold target
(25% vesting)
CPI +3% p.a.
Stretch target
(100% vesting)
CPI +11% p.a.
TSR (40% of award)
Median
Upper quartile
End measurement point
Final year of the
performance period
End of the three year
performance period
In addition, no awards will vest unless the Committee is satisfied that the underlying financial and operational performance of
the business has been satisfactory.
Award levels for 2017 will be 150% of salary for the EPSP for both the CEO and CFO. Annual bonus opportunity will be 150%
of salary for the CEO and 100% of salary for the CFO.
Statement of shareholder voting and shareholder feedback
The following table sets out the votes from shareholders for the Directors’ report on remuneration received at the 2016 AGM:
For
Against
Total votes cast (excluding votes withheld)
Votes withheld
Total votes cast (including votes withheld)
Approve the report on remuneration
Total number of votes
103,311,631
1,021,122
104,332,753
5,775,041
110,107,794
% of votes cast
99.02%
0.98%
100%
Votes withheld are not included in the final proxy figures as they are not recognised as a vote in law.
Approval
This annual report on remuneration has been approved by the Board of Directors.
Signed on behalf of the Board of Directors.
Jill Caseberry
Chairman of the Remuneration Committee
26 June 2017
7372
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWGOVERNANCE REPORT OF
THE DIRECTORS
The Directors present their report and the
audited consolidated accounts for the year
ended 30 April 2017.
Results
Details on financial performance and
dividends can be found in the Strategic
Report from pages 8 to 39.
Close company status
So far as the Directors are aware the close
company provisions of the Income and
Corporation Taxes Act 1988 do not apply to
the Company.
Capital structure
Details of the issued share capital, together
with details of any movements during the
year, are shown in Note 23. The Company
has one class of Ordinary share which carries
no right to fixed income. Each share carries
the right to one vote at general meetings of
the Company.
The cumulative Preference shares of
50p each entitle the holder to receive a
cumulative preferential dividend at the rate
of 5% on the paid up capital and the right
to a return of capital at either winding up
or a repayment of capital. The cumulative
Preference shares do not entitle the holders
to any further or other participation in the
profits or assets of the Company.
The percentage of the issued nominal value
of the Ordinary shares is 99.255% of the
total issued nominal value of all share capital.
There are no specific restrictions on the size
of a holding nor on the transfer of shares,
which are both governed by the general
provisions of the Articles of Association
(the Articles) and prevailing legislation. The
Directors are not aware of any agreements
between holders of the Company’s shares
that may result in restrictions on the transfer
of securities or on voting rights.
Details of employee share schemes are set
out in the Remuneration Report. Shares
held by the Capita Trust are voted on the
instructions of the employees on whose
behalf they are held. Shares in the Guernsey
Trust are voted at the discretion of the
Trustees.
No person has any special rights of control
over the Company’s share capital and all
issued shares are fully paid.
With regards to the appointment and
replacement of Directors, the Company is
governed by the Articles, the UK Corporate
Governance Code, the Companies Act and
related legislation. The Articles themselves
may be amended by special resolution of the
shareholders. The powers of Directors are
set out in the Articles.
The Directors are not aware of any
agreements between the Company and
its Directors or employees that provide
for compensation for loss of office or
employment that occurs because of a
change of control.
Interests in shares
The following interests in the issued Ordinary share capital of the Company have been
notified to the Company in accordance with the provisions of Chapter 5 of the Disclosure
and Transparency Rules:
BlackRock Inc.
Crystal Amber Fund Ltd
JO Hambro Capital Management Ltd
Norges Bank
30 April
2017
5,126,407
5,706,442
6,722,974
6,722,974
%
3.85
4.28
5.05
5.05
Since 30 April 2017 no changes in interests have been notified to the Company.
Directors
Details of the present Directors are listed
on pages 42 and 43. All have served
throughout the year except Kevin Bradshaw,
who was appointed on 11 January 2017, Bob
Contreras, who retired from the Board on
11 January 2017 and Bill Spencer, who
joined the Board in June 2016.
Directors’ indemnities
As permitted by the Company’s Articles
of Association, qualifying third party
indemnities for each Director of the
Company were in place throughout their
periods of office during the year and, for
those currently in office, remained in force
as at the date of signing of this report.
Resolutions to reappoint each of the
Directors in office at the date of this report
will be proposed at the AGM.
Termination provisions in respect of
executive Directors’ contracts can be found
in the Remuneration policy, starting on
page 56.
The Company’s Articles of Association are
available on the Company’s website:
www.northgateplc.com
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Employee consultation
Employees are kept informed on matters
affecting them as employees and on various
issues affecting the performance of the
Group through CEO briefing updates,
announcements on the Group’s intranet,
formal and informal meetings at local level
and direct written communications. All
employees are eligible to participate on an
equal basis in the Group’s SIP, which has
been running successfully since its inception
in 2000.
Disabled employees
Applications for employment by disabled
persons are given full consideration, taking
into account the aptitudes of the applicant
concerned. Every effort is made to try to
ensure that employees who become disabled
whilst already employed are able to continue
in employment by making reasonable
adjustments in the workplace, arranging
appropriate training or providing suitable
alternative employment. It is Group policy
that the training, career development and
promotion of disabled persons should,
as far as possible, be the same as that of
other employees.
The Group’s equal opportunity policy is
available on the Company’s website:
www.northgateplc.com
Political donations
No political donations were made by any
Group company in the year.
Greenhouse gas emissions
The disclosures concerning greenhouse
gas emissions required by the Large and
Medium-sized Companies and Groups
(Accounts and Reports) Regulations are
included in the CSR section of the Strategic
Report on pages 34 to 39.
Remuneration report
The Directors’ Remuneration report contains:
| A statement by Jill Caseberry, Chairman
of the Company’s Remuneration
Committee;
| The Directors’ remuneration policy; and
| The Annual report on remuneration,
which sets out payments made in the
financial year ended 30 April 2017.
The statement by the Chairman and Annual
report on remuneration will be put to
an advisory shareholder vote by ordinary
resolution.
The policy part of the Report, which sets
out the Company’s forward looking policy
on Directors’ remuneration (including the
approach to exit payments to Directors),
is subject to a binding shareholder vote by
ordinary resolution at least every three years.
The vote on the policy document included in
this report will be held in September 2017.
This policy, if approved, will take effect
from the end of the AGM and be in place
for three financial years. If the Directors’
Remuneration Policy is not approved, the
Company will, if and to the extent permitted
by the Companies Act 2006, continue to
make payments to Directors in accordance
with existing contractual arrangements and
will seek shareholder approval for a revised
policy as soon as is practicable.
The Directors’ remuneration report can be
found on pages 54 to 73.
Power to allot shares
The present authority of the Directors to
allot shares was granted at the AGM held
in September 2016 and expires at the
forthcoming AGM. A resolution to renew
that authority for a period expiring at the
conclusion of the AGM to be held in 2018
will be proposed at the AGM. The authority
will permit the Directors to allot up to an
aggregate nominal amount of £22m of
share capital which represents approximately
33% of the present issued Ordinary share
capital and is within the limits approved by
the Investment Association and the National
Association of Pension Funds.
The Directors have no present intention
of exercising such authority and no issue
of shares which would effectively alter
the control of the Company will be made
without the prior approval of shareholders in
a general meeting.
A special resolution will be proposed to
renew the authority of the Directors to
allot Ordinary shares for cash other than to
existing shareholders on a proportionate
basis in accordance with the best practice
guidance set out in the Statement of
Principles issued by The Pre-Emption Group
and which has been endorsed by the
Investment Association. This authority will
be limited to:
| Firstly, an aggregate nominal amount of
£3,330,000, representing approximately
5% of the current issued Ordinary share
capital (Resolution 14b); and
| Secondly, a further 5% of the
Company’s share capital, provided
that this additional power is only used
in connection with acquisitions and
specified capital investments which are
announced contemporaneously with
the issue or which have taken place in
the preceding six month period and are
disclosed in the announcement of the
issue (Resolution 15).
The 2015 Statement of Principles defines
a ‘specified capital investment’ as “one or
more specific capital investment related uses
for the proceeds of an issuance of equity
securities, in respect of which sufficient
information regarding the effect of the
transaction on the listed company, the assets
the subject of the transaction and (where
appropriate) the profits attributable to them
is made available to shareholders to enable
them to reach an assessment of the potential
return”. Items that are regarded as operating
expenditure rather than capital expenditure
will not typically be regarded as falling within
the term ‘specified capital investment’.
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25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWGOVERNANCE REPORT OF
THE DIRECTORS
CONTINUED
The Directors have no present intention of
exercising this authority and confirm their
intention to follow the provisions of The
Pre-Emption Group’s Statement of Principles
regarding cumulative use of such authorities
within a rolling three year period. The
Principles provide that companies should
not issue shares for cash representing more
than 7.5% of the Company’s issued share
capital in any rolling three year period, other
than to existing shareholders, without prior
consultation with shareholders. This limit
excludes any Ordinary shares issued pursuant
to a general disapplication of pre-emption
rights in connection with an acquisition or
specified capital investment.
Disclosure of information under
Listing Rule 9.8.4
Dividend waiver arrangements are in
place for the employee trusts as shown on
page 71.
Length of notice of
general meetings
The minimum notice period permitted by the
Companies Act 2006 for general meetings
of listed companies is 21 days, but the Act
provides that companies may reduce this
period to 14 days (other than for AGMs)
provided that two conditions are met. The
first condition is that the Company offers a
facility for shareholders to vote by electronic
means. This condition is met if the Company
offers a facility, accessible to all shareholders,
to appoint a proxy by means of a website.
Please refer to Note 6 to the Notice of AGM
on page 125 for details of the Company’s
arrangements for electronic proxy
appointment. The second condition is that
there is an annual resolution of shareholders
approving the reduction of the minimum
notice period from 21 days to 14 days.
A resolution to approve 14 days as the
minimum period of notice for all general
meetings of the Company other than AGMs
will be proposed at the AGM. The approval
will be effective until the Company’s next
AGM, when it is intended that the approval
be renewed.
It is the Board’s intention that this authority
would not be used as a matter of routine
but only when merited by the circumstances
of the meeting and in the best interests of
shareholders.
Authority for the Company to
purchase its own shares
There is no present intention to buy back
any of the Company’s own shares and,
if granted, the authority would only be
exercised if to do so would result in an
improvement in earnings per share for
remaining shareholders.
The Directors propose to renew the general
authority of the Company to make market
purchases of its own shares to a total of
13,300,000 Ordinary shares (representing
approximately 10% of the issued Ordinary
share capital) and within the price
constraints set out in the special resolution
to be proposed at the AGM.
Financial instruments
Details of the Group’s use of financial
instruments are given in the Financial review
on pages 18 to 25 and in Notes 21 and 29 to
the accounts.
Auditor
In the case of each of the persons who are
Directors of the Company at the date when
this report was approved:
| So far as each of the Directors is aware,
there is no relevant audit information of
which the Company’s auditor is unaware;
and
| Each of the Directors has taken all the
steps that they ought to have taken as
a Director to make himself aware of any
relevant audit information (as defined)
and to establish that the Company’s
auditor is aware of that information.
This confirmation is given and should be
interpreted in accordance with the provisions
of s418 Companies Act 2006.
A resolution for the appointment of PwC as
auditor of the Company will be proposed
at the forthcoming AGM. This proposal is
supported by the Audit and Risk Committee.
The Directors’ Report, comprising the
Corporate Governance Report and the
Reports of the Audit and Remuneration
Committees, has been approved by the
Board and signed on its behalf.
By order of the Board
Katie Wood
Company Secretary
26 June 2017
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG STATEMENT OF
DIRECTORS’
RESPONSIBILITIES
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the
Company’s transactions and disclose with
reasonable accuracy at any time the financial
position of the Company and the Group
and enable them to ensure that the financial
statements and the Directors’ Remuneration
Report comply with the Companies Act
2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
They are also responsible for safeguarding
the assets of the Company and the Group
and hence for taking reasonable steps for
the prevention and detection of fraud and
other irregularities.
The Directors are responsible for the
maintenance and integrity of the Company’s
website. Legislation in the United Kingdom
governing the preparation and dissemination
of financial statements may differ from
legislation in other jurisdictions.
The Directors consider that the Annual
report and accounts, taken as a whole,
is fair, balanced and understandable and
provides the information necessary for
shareholders to assess the Company’s
performance, business model and strategy.
The Directors are responsible for preparing
the Annual Report, the Directors’
Remuneration Report and the financial
statements in accordance with applicable
law and regulations.
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law the Directors
have prepared the Group and Parent
Company financial statements in accordance
with International Financial Reporting
Standards (IFRS) as adopted by the European
Union. Under company law the Directors
must not approve the financial statements
unless they are satisfied that they give a
true and fair view of the state of affairs of
the Group and the Company and of the
profit or loss of the Group for that period.
In preparing these financial statements, the
Directors are required to:
| Select suitable accounting policies and
then apply them consistently;
| Make judgements and accounting
estimates that are reasonable and
prudent;
| State whether applicable IFRS as
adopted by the European Union have
been followed, subject to any material
departures disclosed and explained in the
financial statements;
| Prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
Each of the Directors, whose names and
functions are listed in ‘Board of Directors’ on
pages 42 to 43, confirm that, to the best of
their knowledge:
| The Group financial statements, which
have been prepared in accordance with
IFRS as adopted by the EU, give a true
and fair view of the assets, liabilities,
financial position and profit of the Group;
and
| The Strategic report includes a fair review
of the development and performance
of the business and the position of the
Group, together with a description of
the principal risks and uncertainties that
it faces.
By order of the Board
Kevin Bradshaw
Chief Executive Officer
26 June 2017
7776
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWGOVERNANCE INDEPENDENT AUDITOR’S
REPORT
to the members of Northgate plc
Report on the financial statements
Our opinion
In our opinion:
| Northgate plc’s Group financial statements and
Parent Company financial statements (the “financial
statements”) give a true and fair view of the state of
the Group’s and of the Parent Company’s affairs as at
30 April 2017 and of the Group’s profit and the Group’s
and the Parent Company’s cash flows for the year then
ended;
| the Group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards (“IFRSs”) as adopted by the
European Union;
| the Parent Company financial statements have been
properly prepared in accordance with IFRSs as adopted
by the European Union and as applied in accordance with
the provisions of the Companies Act 2006; and
| the financial statements have been prepared in
accordance with the requirements of the Companies Act
2006 and, as regards the Group financial statements,
Article 4 of the IAS Regulation.
What we have audited
The financial statements, included within the Annual Report
and Accounts (the “Annual Report”), comprise:
| the Balance sheets as at 30 April 2017;
| the Consolidated income statement for the year then
ended;
| the Statements of comprehensive income for the year
then ended;
| the Cash flow statements for the year then ended;
| the Statements of changes in equity for the year then
ended; and
| the notes to the financial statements, which include a
summary of significant accounting policies and other
explanatory information.
The financial reporting framework that has been applied in the preparation of the financial statements is IFRSs as adopted by
the European Union, and applicable law and, as regards the Parent Company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
Our audit approach
Overview
| Overall Group materiality: £3.6m which represents 5% of profit before tax.
| Northgate plc has two principal trading components in the UK and Spain, both of which
Materiality
are financially significant components for the Group audit.
| In aggregate full scope audits of these components provided us with the evidence required
to form an opinion on the financial statements. Collectively the scope of our work covered
97% of revenue, 96% of total assets and 91% of profit before tax.
Audit scope
The key areas of focus for our audit, as set out below, are:
| Determining appropriate depreciation rates for vehicles available for hire.
Areas
of focus
| The recoverability of aged trade receivables.
| Provisions for uncertain tax positions.
The scope of our audit and our areas of focus
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”).
We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements.
In particular, we looked at where the Directors made subjective judgements, for example in respect of significant accounting
estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits
we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of
bias by the directors that represented a risk of material misstatement due to fraud.
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and
effort, are identified as “areas of focus” in the table below. We have also set out how we tailored our audit to address these
specific areas in order to provide an opinion on the financial statements as a whole, and any comments we make on the
results of our procedures should be read in this context. This is not a complete list of all risks identified by our audit.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG
Area of focus
How our audit addressed the area of focus
Determining appropriate depreciation rates
for vehicles available for hire
The net book value of vehicle assets for hire at 30 April 2017 is £731.7m (2016: £684.5m)
with a depreciation charge for the year of £149.7m (2016: £137.7m). IAS 16 ‘Property, Plant
and Equipment’ requires that depreciation rates and estimated useful lives are reviewed
regularly to ensure that the net book value of tangible fixed assets when they are sold is
broadly equivalent to their market value.
This requires management to make an estimate of the sale proceeds at the time of disposal.
Determining likely sales proceeds for future vehicle disposals is judgemental and requires
a number of key estimates to be made, including the age, condition and mileage of each
vehicle, the method of selling a vehicle and expected future market conditions, such as
forecast levels of supply and demand.
Further explanation is included in the Group’s critical accounting judgements and key
sources of estimation uncertainty in Note 3, the Audit Committee report on page 51 and
Note 14.
The recoverability of aged trade receivables
Trade receivables are stated in the balance sheet at their fair value less any provision for
irrecoverable amounts. At 30 April 2017 net trade receivables were £53.7m (2016: £58.1m)
after provisions of £13.9m (2016: £12.8m).
Determining an appropriate provision for potentially irrecoverable trade receivables requires
judgement across the Group’s large and diverse customer base of the likely levels of recovery
of these receivables along with the consideration of the overall economic environments in
the UK, Ireland and Spain.
Further details are included in the Group’s critical accounting judgements and key sources
of estimation uncertainty in Note 3, the Audit Committee report on pages 51 to 53 and
Note 18.
Provisions for uncertain tax positions
We focused on this area due to the judgment required in assessing the need for provisions
to cover the risk of challenge of certain of the Group’s tax positions, which have been taken
as current tax deductions in the current and previous years.
Uncertain tax provisions at the year end totalled £14.3m (2016: £14.2m).
We examined management’s assumptions of expected future market values of hire vehicles
used in the calculation by comparison to external third party industry data for expected
future market prices.
We considered the historical accuracy of expected future market values by comparison to
actual values achieved.
We tested the assumption of the level of vehicle registrations to third party, publicly available
data and recalculated the impact of a reduction in fleet age on disposal profits.
We performed detailed testing of the calculations supporting these judgements, including
comparison to recent actual market prices achieved on disposal of similar vehicles.
From the work we performed we did not identify any material misstatements.
We recalculated provisions to test whether they were calculated in accordance with Group
policy.
We examined the levels of post year end cash collections against year end trade receivables
and investigated individual overdue balances, by reference to recent history of recoveries and
correspondence with customers.
To assess the reasonableness of provisions we tested the age profile of the trade receivables
balance back to a sample of invoices raised. We considered the collectability of individual
balances raised more than 90 days, by reference to recent history of recoveries and
correspondence with customers.
We also performed look back testing to consider management’s historical accuracy of
provisioning for trade receivables.
From the work we performed we did not identify any material misstatements.
We evaluated and challenged management’s rationale for the level of provisions held. We
considered the status of recent and current tax audits and enquiries, the out-turn of previous
claims and the tax environment in each territory. We also considered any penalty regimes
that could apply should any of the Group’s tax positions be challenged successfully.
From the work we performed we did not identify any material misstatements.
7978
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWGOVERNANCE INDEPENDENT AUDITOR’S
REPORT
to the members of Northgate plc
CONTINUED
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to
give an opinion on the financial statements as a whole, taking into account the geographic
structure of the Group, the accounting processes and controls, and the industry in which the
Group operates.
Based on our professional judgement, we determined materiality for the financial statements
as a whole as follows:
Overall Group materiality
£3.6m (2016: £3.9m).
How we determined it
5% of profit before tax.
Northgate plc has two principal trading components in the UK and Spain, a smaller trading
component in Ireland and a non-trading component in Malta, overseen by a Group function
in the UK.
Rationale for benchmark
applied
The subsidiary businesses in the UK and Spain were financially significant components for the
Group audit.
The UK audit team performed the audit of Northgate’s UK business and received an audit
opinion from the PwC member firm in Spain on Northgate Spain.
We ensured that appropriate further audit work was undertaken for Northgate plc as the
Parent Company. This included audit work on, for example, centrally held tax provisions,
accounting for financial hedging instruments, the consolidation of the Group’s results, the
preparation of the financial statements, assessing the appropriate classification of exceptional
items and work on certain disclosures within the Directors’ remuneration report.
We were in active dialogue throughout the year with the team responsible for the audit of
Northgate Spain; this included consideration of how they planned and performed their work,
visiting the business once during the year and attending the audit closing meeting, which was
also attended by the Northgate Spain Finance Director.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain
quantitative thresholds for materiality. These, together with qualitative considerations,
helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and on the financial statements as a whole.
Component materiality
We believe a standard benchmark of 5% of profit before
tax is an appropriate quantitative indicator of materiality,
although of course an item could also be material
for qualitative reasons. We selected profit before tax
because management believes it best reflects the
performance of Northgate plc.
For each component in our audit scope, we allocated a
materiality that is less than our overall Group materiality.
The range of materiality allocated across components
was £2.2m for Northgate Spain to £3.0m for Northgate
UK. Certain components were audited to a local
statutory audit materiality that was also less than our
overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified
during our audit above £180,000 (2016: £200,000) as well as misstatements below that
amount that, in our view, warranted reporting for qualitative reasons.
Going concern
Under the Listing Rules we are required to review the Directors’ statement, set out on page
24, in relation to going concern. We have nothing to report having performed our review.
Under ISAs (UK & Ireland) we are required to report to you if we have anything material
to add or to draw attention to in relation to the Directors’ statement about whether they
considered it appropriate to adopt the going concern basis in preparing the financial
statements. We have nothing material to add or to draw attention to.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:
| information in the Annual Report is:
— materially inconsistent with the information in the audited financial
statements; or
— apparently materially incorrect based on, or materially inconsistent
with, our knowledge of the Group and Parent Company acquired
in the course of performing our audit; or
— otherwise misleading.
| the statement given by the Directors on page 77, in accordance
with provision C.1.1 of the UK Corporate Governance Code (the
“Code”), that they consider the Annual Report taken as a whole to
be fair, balanced and understandable and provides the information
necessary for members to assess the Group’s and Parent Company’s
position and performance, business model and strategy is materially
inconsistent with our knowledge of the Group and Parent Company
acquired in the course of performing our audit.
We have no
exceptions
to report.
We have no
exceptions
to report.
| the section of the Annual Report on page 51, as required by provision
C.3.8 of the Code, describing the work of the Audit Committee does
not appropriately address matters communicated by us to the Audit
Committee.
We have no
exceptions
to report.
As noted in the Directors’ statement, the Directors have concluded that it is appropriate
to adopt the going concern basis in preparing the financial statements. The going concern
basis presumes that the Group and Parent Company have adequate resources to remain
in operation, and that the Directors intend them to do so, for at least one year from the
date the financial statements were signed. As part of our audit we have concluded that the
Directors’ use of the going concern basis is appropriate. However, because not all future
events or conditions can be predicted, these statements are not a guarantee as to the
Group’s and Parent Company’s ability to continue as a going concern.
Other required reporting
Consistency of other information and compliance
with applicable requirements
Companies Act 2006 reporting
In our opinion, based on the work undertaken in the course of the audit:
| the information given in the Strategic Report and the Report of the Directors for the
financial year for which the financial statements are prepared is consistent with the
financial statements; and
| the Strategic Report and the Report of the Directors have been prepared in accordance
with applicable legal requirements.
In addition, in light of the knowledge and understanding of the Group, the Parent Company
and their environment obtained in the course of the audit, we are required to report if we
have identified any material misstatements in the Strategic Report and the Report of the
Directors. We have nothing to report in this respect.
In our opinion, based on the work undertaken in the course of the audit:
| the information given in the Corporate Governance Statement set out on pages 48 to 50
with respect to internal control and risk management systems and about share capital
structures is consistent with the financial statements and has been prepared in accordance
with applicable legal requirements; and
| the information given in the Corporate Governance Statement set out on pages 48 to
50 with respect to the Company’s corporate governance code and practices and about
its administrative, management and supervisory bodies complies with rules 7.2.2, 7.2.3
and 7.2.7 of the Disclosure Guidance and Transparency Rules sourcebook of the Financial
Conduct Authority.
In addition, in light of the knowledge and understanding of the Group, the Parent Company
and their environment obtained in the course of the audit, we are required to report if
we have identified any material misstatements in the information referred to above in the
Corporate Governance Statement. We have nothing to report in this respect.
8180
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWGOVERNANCE INDEPENDENT AUDITOR’S
REPORT
to the members of Northgate plc
CONTINUED
The Directors’ assessment of the prospects of the Group and of the principal
risks that would threaten the solvency or liquidity of the Group
Adequacy of accounting records and information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:
Under ISAs (UK & Ireland) we are required to report to you if we have
anything material to add or to draw attention to in relation to:
| the Directors’ confirmation on page 28 of the Annual Report, in
accordance with provision C.2.1 of the Code, that they have carried out
a robust assessment of the principal risks facing the Group, including
those that would threaten its business model, future performance,
solvency or liquidity.
| the disclosures in the Annual Report that describe those risks and
explain how they are being managed or mitigated.
| the Directors’ explanation on page 33 of the Annual Report, in
accordance with provision C.2.2 of the Code, as to how they have
assessed the prospects of the Group, over what period they have
done so and why they consider that period to be appropriate, and
their statement as to whether they have a reasonable expectation that
the Group will be able to continue in operation and meet its liabilities
as they fall due over the period of their assessment, including any
related disclosures drawing attention to any necessary qualifications or
assumptions.
Under the Listing Rules we are required to review the Directors’ statement
that they have carried out a robust assessment of the principal risks facing
the Group and the Directors’ statement in relation to the longer-term
viability of the group. Our review was substantially less in scope than an
audit and only consisted of making enquiries and considering the Directors’
process supporting their statements; checking that the statements are
in alignment with the relevant provisions of the Code; and considering
whether the statements are consistent with the knowledge acquired by us
in the course of performing our audit. We have nothing to report having
performed our review.
We have
nothing
material
to add or
to draw
attention to.
We have
nothing
material
to add or
to draw
attention to.
We have
nothing
material
to add or
to draw
attention to.
| we have not received all the information and explanations we require for our audit; or
| adequate accounting records have not been kept by the Parent Company, or returns
adequate for our audit have not been received from branches not visited by us; or
| the Parent Company financial statements and the part of the Directors’ Remuneration
Report to be audited are not in agreement with the accounting records and returns.
| We have no exceptions to report arising from this responsibility.
Directors’ remuneration
Directors’ remuneration report – Companies Act 2006 opinion
In our opinion, the part of the Directors’ Remuneration Report to be audited has been
properly prepared in accordance with the Companies Act 2006.
Other Companies Act 2006 reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain
disclosures of Directors’ remuneration specified by law are not made. We have no exceptions
to report arising from this responsibility.
Corporate governance statement
Under the Companies Act 2006 we are required to report to you if, in our opinion, a
corporate governance statement has not been prepared by the Parent Company. We have no
exceptions to report arising from this responsibility.
Under the Listing Rules we are required to review the part of the Corporate Governance
Statement relating to ten further provisions of the Code. We have nothing to report having
performed our review.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Responsibilities for the financial statements and the audit
Our responsibilities and those of the Directors
As explained more fully in the Directors’ Responsibilities set out on page 77, the Directors are
responsible for the preparation of the financial statements and for being satisfied that they
give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance
with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the
Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Parent Company’s
members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and
for no other purpose. We do not, in giving these opinions, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into whose hands
it may come save where expressly agreed by our prior consent in writing.
What an audit of financial statements involves
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This includes an assessment of:
| whether the accounting policies are appropriate to the Group’s and the Parent Company’s
circumstances and have been consistently applied and adequately disclosed;
| the reasonableness of significant accounting estimates made by the Directors; and
| the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the Directors’ judgements against
available evidence, forming our own judgements, and evaluating the disclosures in the
financial statements.
We test and examine information, using sampling and other auditing techniques, to the
extent we consider necessary to provide a reasonable basis for us to draw conclusions. We
obtain audit evidence through testing the effectiveness of controls, substantive procedures or
a combination of both.
In addition, we read all the financial and non-financial information in the Annual Report to
identify material inconsistencies with the audited financial statements and to identify any
information that is apparently materially incorrect based on, or materially inconsistent with,
the knowledge acquired by us in the course of performing the audit. If we become aware
of any apparent material misstatements or inconsistencies we consider the implications for
our report. With respect to the Strategic Report, Report of the Directors and Corporate
Governance Statement, we consider whether those reports include the disclosures required
by applicable legal requirements.
Ian Morrison
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Leeds
26 June 2017
8382
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWGOVERNANCE FINANCIALS
In the financials you will find the
financial statements for both the Group
and the Parent Company, along with
the accompanying notes.
86 Consolidated income statement
87 Statements of comprehensive income
88 Balance sheets
89 Cash flow statements
90 Notes to the cash flow statements
91 Statements of changes in equity
92 Notes to the accounts
25361.02 13-6-17 Proof Four 8584
25361.02 13-6-17 Proof FourHEADING ONESTRAPLINEREVIEWFINANCIALS CONSOLIDATED
INCOME
STATEMENT
FOR THE YEAR ENDED 30 APRIL 2017
Revenue: hire of vehicles
Revenue: sale of vehicles
Total revenue
Cost of sales
Gross profit
Administrative expenses (excluding exceptional
items and intangible amortisation)
Exceptional administrative expenses
Intangible amortisation
Total administrative expenses
Operating profit
Interest income
Finance costs (excluding exceptional items)
Exceptional finance credit (costs)
Profit before taxation
Taxation
Profit for the year
Notes
4
4
4
26
13
4, 5
7
7, 26
8
Underlying
2017
£000
456,120
211,309
667,429
(514,446)
152,983
(68,378)
–
–
(68,378)
84,605
2
(9,601)
–
75,006
(12,007)
62,999
Statutory
2017
£000
456,120
211,309
667,429
(514,446)
152,983
(68,378)
(1,293)
(1,830)
(71,501)
81,482
2
(9,601)
339
72,222
(11,321)
60,901
Underlying
2016
£000
447,134
171,154
618,288
(459,286)
159,002
(64,683)
–
–
(64,683)
94,319
3
(11,373)
–
82,949
(17,599)
65,350
Statutory
2016
£000
447,134
171,154
618,288
(459,286)
159,002
(64,683)
(1,777)
(1,979)
(68,439)
90,563
3
(11,373)
(1,561)
77,632
(16,153)
61,479
Profit for the year is wholly attributable to owners of the Parent Company. All results arise from continuing operations.
Underlying profit excludes exceptional items as set out in Note 26, as well as certain intangible amortisation and the taxation
thereon, in order to provide a better indication of the Group’s underlying business performance.
Earnings per share
Basic
Diluted
10
10
47.3p
46.7p
45.7p
45.1p
49.0p
48.3p
46.1p
45.5p
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG STATEMENTS OF
COMPREHENSIVE
INCOME
FOR THE YEAR ENDED 30 APRIL 2017
Amounts attributable to the owners of the Parent
Company
Profit attributable to the owners
Other comprehensive income (expense)
Foreign exchange differences on retranslation
of net assets of subsidiary undertakings
Net foreign exchange differences on long term
borrowings held as hedges
Foreign exchange difference on revaluation reserve
Recycling of hedging reserve items
Net fair value gains (losses) on cash flow hedges
Deferred tax (charge) credit recognised directly in equity
relating to cash flow hedges
Total other comprehensive income (expense)
Total comprehensive income for the year
GROUP
2017
£000
2016
£000
COMPANY
2017
£000
2016
£000
Notes
60,901
61,479
38,138
37,624
25
25,952
22,775
(21,793)
85
–
659
(157)
4,746
65,647
(18,347)
70
649
(1,428)
285
4,004
65,483
–
–
–
–
659
(157)
502
38,640
–
–
–
–
(1,428)
285
(1,143)
36,481
All items will subsequently be reclassified to the consolidated income statement.
8786
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWFINANCIALS BALANCE
SHEETS
AS AT 30 APRIL 2017
Total equity is wholly attributable to the owners of the
Parent Company. The financial statements on pages 86 to
123 were approved by the Board of Directors and authorised
for issue on 26 June 2017.
They were signed on its behalf by:
A Page
Director
PJ Gallagher
Director
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment: vehicles for hire
Other property, plant and equipment
Total property, plant and equipment
Deferred tax assets
Investments
Total non-current assets
Current assets
Inventories
Trade and other receivables
Derivative financial instrument assets
Cash and bank balances
Total current assets
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Short term borrowings
Total current liabilities
Net current assets
Non-current liabilities
Derivative financial instrument liabilities
Long term borrowings
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium account
Own shares reserve
Hedging reserve
Translation reserve
Other reserves
Retained earnings
At 1 May
Profit for the financial year
Other changes in retained earnings
At 30 April
Total equity
Notes
12
13
14
15
22
16
17
18
21
19
20
21
20
22
23
24
25
25
25
25
GROUP
2017
£000
3,589
3,309
731,657
65,262
796,919
13,730
–
817,547
33,666
62,656
213
41,166
137,701
955,248
64,913
18,568
32,585
116,066
21,635
2,706
318,439
1,420
322,565
438,631
516,617
66,616
113,508
(1,659)
(2,020)
(5,241)
68,614
242,451
60,901
(26,553)
276,799
516,617
Restated
2016
£000
3,589
4,054
684,499
65,765
750,264
15,256
–
773,163
23,109
63,499
–
55,248
141,856
915,019
53,183
19,350
46,515
119,048
22,808
3,152
318,610
3,184
324,946
443,994
471,025
66,616
113,508
(8,157)
(2,522)
(9,400)
68,529
150,475
61,479
30,497
242,451
471,025
COMPANY
2017
£000
–
–
–
2,141
2,141
1,306
120,893
124,340
–
883,455
213
–
883,668
1,008,008
381,156
1,604
19,492
402,252
481,416
2,706
318,439
–
321,145
723,397
284,611
66,616
113,508
–
(2,020)
–
64,570
23,740
38,138
(19,941)
41,937
284,611
2016
£000
–
–
–
2,398
2,398
1,688
120,893
124,979
–
825,275
–
–
825,275
950,254
328,233
–
34,347
362,580
462,695
3,152
318,610
–
321,762
684,342
265,912
66,616
113,508
–
(2,522)
–
64,570
4,564
37,624
(18,448)
23,740
265,912
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG CASH FLOW
STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2017
Net cash generated from (used in) operations
Investing activities
Interest received
Dividends received from subsidiary undertakings
Loans to subsidiary undertakings
Proceeds from disposals of other property, plant and
equipment
Purchases of other property, plant and equipment
Purchases of intangible assets
Net cash (used in) generated from investing activities
Financing activities
Dividends paid
Receipt of bank loans and other borrowings
Repayments of bank loans and other borrowings
Debt issue costs paid
Net payments to acquire own shares for share schemes
Termination of financial instruments
Net cash used in financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at 1 May
Effect of foreign exchange movements
Cash and cash equivalents at 30 April
GROUP
COMPANY
Notes
(a)
2017
£000
47,818
2016
£000
73,726
2017
£000
(10,425)
2016
£000
(10,867)
2
–
–
1,222
(4,878)
(1,133)
(4,787)
(21,875)
–
(21,369)
–
(114)
–
(43,358)
(327)
18,748
1,216
19,637
3
–
–
1,001
(4,503)
(1,682)
(5,181)
(20,114)
70,410
(107,653)
(1,675)
(2,366)
(1,561)
(62,959)
5,586
9,676
3,486
18,748
2
53,013
17,002
–
(149)
–
69,868
(21,875)
–
(21,151)
–
(114)
–
(43,140)
16,303
(34,347)
(1,448)
(19,492)
3
44,788
20,411
–
–
–
65,202
(20,114)
70,410
(103,280)
(1,675)
(2,366)
(1,561)
(58,586)
(4,251)
(28,638)
(1,458)
(34,347)
(b)
8988
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWFINANCIALS NOTES TO THE
CASH FLOW
STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2017
(a) Net cash generated from (used in) operations
Operating profit (loss)
Adjustments for:
Depreciation of property, plant and equipment
Net impairment of property, plant and equipment
Amortisation of intangible assets
Loss on disposal of property, plant and equipment
Share options fair value charge
Operating cash flows before movements in working capital
Decrease in non-vehicle inventories
Decrease in receivables
(Decrease) increase in payables
Cash generated from operations
Income taxes paid, net
Interest paid
Net cash generated from (used in) operations
Purchases of vehicles
Proceeds from disposals of vehicles
Net cash generated from (used in) operations
(b) Cash and cash equivalents
Cash and cash equivalents comprise:
Cash and bank balances
Bank overdrafts
Cash and cash equivalents
GROUP
COMPANY
2017
£000
81,482
2016
£000
90,563
156,291
131
1,891
199
1,934
241,928
525
4,801
(8,952)
238,302
(12,602)
(8,552)
217,148
(346,305)
176,975
47,818
144,272
–
1,979
122
1,666
238,602
866
10,157
(6,825)
242,800
(8,259)
(10,527)
224,014
(296,165)
145,877
73,726
2017
£000
(593)
–
63
343
–
–
1,934
1,747
–
68
(492)
1,323
–
(11,748)
(10,425)
–
–
(10,425)
2016
£000
(2,104)
61
–
16
–
1,666
(361)
–
2,353
315
2,307
–
(13,174)
(10,867)
–
–
(10,867)
Restated
GROUP
2017
£000
2016
£000
COMPANY
2017
£000
2016
£000
41,166
(21,529)
19,637
55,248
(36,500)
18,748
–
(19,492)
(19,492)
–
(34,347)
(34,347)
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG
STATEMENTS
OF CHANGES
IN EQUITY
FOR THE YEAR ENDED 30 APRIL 2017
Group
Total equity at 1 May 2015
Share options fair value charge
Share options exercised
Profit attributable to owners of the
Parent Company
Dividends paid
Net purchase of own shares
Transfer of shares on vesting of
share options
Other comprehensive (expense)
income
Total equity at 1 May 2016
Share options fair value charge
Share options exercised
Profit attributable to owners of the
Parent Company
Dividends paid
Net purchase of own shares
Transfer of shares on vesting of
share options
Other comprehensive income
Total equity at 30 April 2017
Share capital
and share
premium
£000
180,124
–
–
–
–
–
–
–
180,124
–
–
–
–
–
–
–
180,124
Own
shares
reserve
£000
(8,812)
–
–
–
–
(2,366)
3,021
–
(8,157)
–
–
–
–
(114)
6,612
–
(1,659)
Hedging
reserve
£000
Translation
reserve
£000
(2,028)
–
–
(13,828)
–
–
Other
reserves
£000
68,459
–
–
Retained
earnings
£000
202,441
1,666
(3,021)
Total
£000
426,356
1,666
(3,021)
–
–
–
–
–
–
–
–
–
–
–
–
61,479
(20,114)
–
61,479
(20,114)
(2,366)
–
3,021
(494)
(2,522)
–
–
4,428
(9,400)
–
–
70
68,529
–
–
–
242,451
1,934
(6,612)
4,004
471,025
1,934
(6,612)
–
–
–
–
–
–
–
–
–
60,901
(21,875)
–
60,901
(21,875)
(114)
–
502
(2,020)
–
4,159
(5,241)
–
85
68,614
–
–
276,799
6,612
4,746
516,617
Company
Total equity at 1 May 2015
Share options fair value charge
Profit attributable to owners of the Parent Company
Dividends paid
Other comprehensive expense
Total equity at 1 May 2016
Share options fair value charge
Profit attributable to owners of the Parent Company
Dividends paid
Other comprehensive income
Total equity at 30 April 2017
Share capital
and share
premium
£000
180,124
–
–
–
–
180,124
–
–
–
–
180,124
Hedging
reserve
£000
(1,379)
–
–
–
(1,143)
(2,522)
–
–
–
502
(2,020)
Other
reserves
£000
64,570
–
–
–
–
64,570
–
–
–
–
64,570
Retained
earnings
£000
4,564
1,666
37,624
(20,114)
–
23,740
1,934
38,138
(21,875)
–
41,937
Total
£000
247,879
1,666
37,624
(20,114)
(1,143)
265,912
1,934
38,138
(21,875)
502
284,611
Other reserves comprise the capital redemption reserve, revaluation reserve and merger reserve.
9190
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWFINANCIALS NOTES TO
THE ACCOUNTS
1 General information
Northgate plc is a company incorporated in England and
Wales under the Companies Act 2006. The address of the
registered office is given on page 128. The nature of the
Group’s operations and its principal activities are set out in
the Strategic report on pages 8 to 39.
The accounts are presented in UK Sterling because this is
the currency of the primary economic environment in which
the Group operates. Foreign operations are included in
accordance with the policies set out in Note 2.
2 Principal accounting policies
Statement of compliance
The accounts have been prepared in accordance with IFRS,
adopted by the EU and therefore the Group accounts comply
with Article 4 of the EU IAS Regulation.
Basis of preparation
The financial information has been prepared on the
historical cost basis, except for the revaluation of certain
financial instruments. The accounts have been prepared in
accordance with International Financial Reporting Standards,
Interpretations Committee (IFRS-IC) interpretations and the
Companies Act 2006 applicable to companies reporting
under IFRS.
Going concern
Having assessed the principal risks and the other matters
discussed in connection with the viability statement on page
33 the Directors considered it appropriate to adopt the
going concern basis of accounting in preparing the financial
statements.
Changes in accounting policy
Annual improvements 2014, IFRS 14 (Regulatory deferral
accounts), IFRS 11 (Joint arrangements), IAS 16 (Property,
plant and equipment), IAS 41 (Agriculture), IAS 38 (Intangible
assets), IAS 27 (Separate financial statements), IAS 1
(Presentation of financial statements), IFRS 10 (Consolidated
financial statements) and IAS 28 (Investments in associates)
became effective or were amended during the year but
had no impact on the financial statements. Various new
accounting standards and amendments were endorsed
during the year, none of which have had or are expected
to have any significant impact on the Group. As a result of
the clarification of an accounting standard, cash and cash
equivalents and bank overdrafts are now shown gross,
even where accounts have a right of offset within the same
banking facility. The comparatives as at 30 April 2016 have
been restated to increase cash and bank balances and bank
overdrafts by £36,500,000. IFRS 9 (Financial instruments)
and IFRS 15 (Revenue from contracts with customers) will be
effective from 1 May 2018 but neither are expected to have
a significant impact on the Group’s reported results.
Basis of consolidation
Subsidiary undertakings are entities controlled by the
Company. Control exists when the Company is exposed, or
has rights, to variable returns from its involvement with the
subsidiary and has the ability to affect those returns through
its power over the subsidiary. The consolidated accounts
include the accounts of the Company and its subsidiary
undertakings made up to 30 April 2016 and 30 April 2017.
On acquisition, the assets, liabilities and contingent liabilities
of a subsidiary undertaking are measured at their fair
values at the date of acquisition. Any excess of the cost of
acquisition over the fair values of the identifiable net assets
acquired is recognised as goodwill. Any deficiency of the cost
of acquisition below the fair values of the identifiable net
assets acquired (i.e. discount on acquisition) is credited to the
income statement in the period of acquisition.
Where necessary, adjustments are made to the accounts
of subsidiary undertakings to bring the accounting policies
used into line with those used by the Group. All intra-Group
transactions, balances, income and expenses are eliminated
on consolidation.
Revenue recognition
Group revenue is measured at the fair value of the
consideration received or receivable in respect of the hire
of vehicles, sale of used vehicles and the supply of related
goods and services in the normal course of business, net of
value added tax and discounts.
Revenue from vehicle hire is recognised evenly over the
hire period. Revenue from sales of other related goods and
services is recognised at the point at which the goods or
services are provided.
Revenue from the sale of used vehicles is recognised at the
point of sale, which is usually represented by the point at
which the customer takes possession of the vehicle. Where
cash is received in advance of customers collecting or taking
delivery of vehicles, revenue is recognised subject to the bill
and hold criteria of IAS 18 (Revenue) being met.
Goodwill
All business combinations are accounted for by applying the
acquisition method. Goodwill represents amounts arising on
acquisition of subsidiary undertakings and is the difference
between the cost of the acquisition and the fair value of the
net identifiable assets and liabilities acquired.
Goodwill is stated at cost less any accumulated impairment
losses identified through annual or other tests for
impairment. Any impairment is recognised immediately in
the income statement and is not subsequently reversed.
Intangible assets – arising on business
combinations
Amortisation of intangible assets is charged to the income
statement on a straight-line basis over the estimated useful
lives of each intangible asset. Intangible assets are amortised
from the date they are available for use. The estimated useful
lives are as follows:
Customer relationships
5 to 13 years
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG
Intangible assets – other
Other intangible assets that are acquired by the Group are
stated at cost less accumulated amortisation and impairment
losses. Software assets are amortised on a straight-line basis
over their estimated useful lives, which range from three to
10 years.
Property, plant and equipment
Property, plant and equipment is stated at historical cost, less
accumulated depreciation and any provision for impairment.
Certain properties were revalued prior to the adoption
of IFRS. These valuations were treated as deemed cost at
the time of adopting IFRS for the first time. Depreciation
is provided so as to write off the cost of assets to residual
values on a straight-line basis over the assets’ useful
estimated lives as follows:
Freehold buildings
50 years
Leasehold buildings
50 years or over the life of
the lease, whichever is
shorter
Plant, equipment & fittings
3 to 10 years
Vehicles for hire
Motor vehicles
3 to 12 years
3 to 6 years
Vehicles for hire are depreciated on a straight-line basis
using depreciation rates that reflect economic lives of
between three and 12 years, averaging around six years.
These depreciation rates have been determined with the
anticipation that the net book values at the point the
vehicles are transferred into inventories is in line with the
open market values for those vehicles. Depreciation charges
reflect adjustments made as a result of differences between
expected and actual residual values of used vehicles, taking
into account the further directly attributable costs to sell the
vehicles.
Freehold land is not depreciated.
On the subsequent sale or retirement of properties revalued
prior to the adoption of IFRS, the attributable revaluation
surplus remaining in the revaluation reserve is transferred
directly to retained earnings. The residual value, if not
insignificant, is reassessed annually.
Investments in subsidiaries
Investments in subsidiaries are shown at cost less any
provision for impairment.
Impairment
At each balance sheet date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any).
The recoverable amount is the higher of fair value less
selling costs and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash
flows have not been adjusted.
An impairment loss is recognised in the income statement
whenever the carrying amount of an asset exceeds its
recoverable amount. Impairment losses recognised in
respect of cash generating units are allocated first to reduce
the carrying amount of any goodwill allocated to cash
generating units and then to reduce the carrying amount of
other assets in the unit on a pro-rata basis.
Where an impairment loss has been recognised in an
earlier period, the Group reassesses whether there are any
indications that such impairment has decreased or no longer
exists. If an impairment has decreased or no longer exists, an
impairment reversal is recognised in the income statement to
the extent required.
Non-current assets held for sale
Non-current assets are classified as held for sale when their
carrying amount is to be recovered principally through a sale
transaction and a sale is considered highly probable. They
are stated at the lower of carrying amount and fair value less
costs to sell.
Inventories
Used vehicles held for resale are valued at the lower of cost
or net realisable value. Net realisable value represents the
estimated selling price less costs to be incurred in marketing,
selling and distribution.
Other inventories comprise spare parts and consumables and
are valued at the lower of cost or net realisable value.
Taxation
The tax expense represents the sum of the tax currently
payable and deferred tax.
The tax currently payable is based on taxable profit for the
year and any amounts outstanding in relation to previous
years. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income or
expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible.
Deferred tax is the tax expected to be payable or recoverable
on differences between the carrying amounts of assets and
liabilities in the accounts and the corresponding tax bases
used in the computation of taxable profit and is accounted
for using the balance sheet liability method. Deferred tax
liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available
against which deductible temporary differences can be
utilised. Such assets and liabilities are not recognised if the
temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other
assets and liabilities in a transaction that affects neither the
tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at
each balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries except
where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.
9392
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWFINANCIALS
NOTES TO
THE ACCOUNTS
CONTINUED
2 Principal accounting policies continued
Deferred tax is calculated at the tax rates that are expected
to apply in the period when the liability is settled or the asset
is realised.
Current and deferred tax is charged or credited in the
income statement, except when it relates to items charged
or credited directly to equity, in which case the current or
deferred tax is also dealt with in equity.
Financial instruments and hedge accounting
Financial assets and liabilities are recognised in the Group’s
balance sheet when the Group becomes a party to the
contractual provision of the instrument.
Trade receivables are non-interest bearing and are initially
stated at their fair value and subsequently at amortised cost
less any appropriate provision for irrecoverable amounts.
Trade payables are non-interest bearing and are stated
initially at their fair value and subsequently at amortised cost.
The Group uses derivative financial instruments to hedge its
exposure to interest and foreign exchange rate risks arising
from operational, financing and investment activities. In
accordance with its treasury policy, the Group does not hold
or issue derivative financial instruments for trading purposes.
Derivative financial instruments are stated at fair value. Any
gain or loss on remeasurement to fair value is recognised
immediately in the income statement except where
derivatives qualify for hedge accounting, where recognition
of the resultant gain or loss depends on the nature of the
items being hedged.
The fair value of interest rate derivatives is the estimated
amount that the Group would receive or pay to terminate
the derivative at the balance sheet date, taking into account
current interest rates and the current creditworthiness of the
derivative counterparties.
Changes in the fair value of derivative financial instruments
that are designated and effective as hedges of future cash
flows are recognised in other comprehensive income and the
ineffective portion is recognised in the income statement.
Amounts previously recognised in other comprehensive
income and accumulated in equity are reclassified to profit
or loss in the periods when the hedged item is recognised
in profit or loss, in the same line of the income statement as
the recognised hedged item.
However, when the forecast transaction that is hedged
results in the recognition of a non-financial asset or a non-
financial liability, the gains and losses previously accumulated
in equity are transferred from equity and included in the
initial measurement of the cost of the non-financial asset or
non-financial liability.
Changes in the fair value of derivative financial instruments
that do not qualify for hedge accounting are recognised in
the income statement as they arise.
Hedge accounting for cash flow hedges is discontinued
when the hedging instrument expires or is sold, terminated,
exercised or no longer qualifies for hedge accounting. At that
time, any cumulative gain or loss on the hedging instrument
recognised in equity is retained in equity until the forecasted
transaction occurs. If a hedged transaction is no longer
expected to occur, the net cumulative gain or loss recognised
in equity is transferred to the income statement as a net
profit or loss for the period.
Changes in the fair value of derivative financial instruments
that are designated and effective as net investment hedges
are recognised directly in equity and the ineffective portion
is recognised in the income statement. Exchange differences
arising on the net investment hedges are transferred to the
translation reserve.
No derivative assets and liabilities are offset. Certain
customer rebates, which will be settled in cash, are offset
against the trade receivables balance until such time as these
are settled.
Cash and cash equivalents
Cash and cash equivalents consist of cash at bank and in
hand and bank overdrafts. Cash at bank and in hand and
bank overdrafts are shown gross irrespective of where
accounts have a right of offset within the same banking
facility.
Bank loans, other loans, loan notes and issue
costs
Bank loans, other loans and loan notes are stated initially at
fair value – the amount of proceeds after deduction of issue
costs – and then subsequently at amortised cost. Finance
charges, including premiums payable on settlement or
redemption and direct issue costs, are accounted for in the
income statement on an accruals basis.
Foreign currencies
Transactions in foreign currencies other than UK Sterling are
recorded at the rate prevailing at the date of the transaction.
At each balance sheet date, monetary assets and liabilities
that are denominated in foreign currencies are retranslated
at the rates prevailing at that date.
The net assets of overseas subsidiary undertakings are
translated into UK Sterling at the rate of exchange ruling at
the balance sheet date. The exchange difference arising on
the retranslation of opening net assets is recognised directly
in equity. The results of overseas subsidiary undertakings
are translated into UK Sterling using average exchange
rates for the financial period and variances compared with
the exchange rate at the balance sheet date are recognised
directly in equity. All other translation differences are taken
to the income statement with the exception of exchange
differences on foreign currency borrowings that provide
a hedge against Group equity investments in foreign
enterprises, which are recognised directly in equity, together
with the exchange difference on the net investment in these
enterprises.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Goodwill and fair value adjustments arising on acquisition
of a foreign entity are treated as assets and liabilities of
the foreign entity. They are denominated in the functional
currency of the foreign entity and translated at the exchange
rate prevailing at the balance sheet date, with any variances
reflected directly in equity.
All foreign exchange differences reflected directly in equity
are shown in the translation reserve component of equity.
Leasing
As Lessee:
Rentals payable under operating leases are charged to the
income statement on a straight-line basis over the lease term.
As Lessor:
Motor vehicles and equipment hired to customers under
operating leases are included within property, plant and
equipment. Income from such leases is taken to the income
statement evenly over the period of the operating lease
agreement.
Retirement benefit costs
The Group operates defined contribution pension
schemes. Contributions in respect of defined contribution
arrangements are charged to the income statement in the
period they fall due. Pension contributions in respect of
one of these arrangements are held in trustee administered
funds, independently of the Group’s finances.
The Group also operates Group personal pension plans. The
costs of these plans are charged to the income statement as
they fall due.
Employee share schemes and share based
payments
The Group issues equity-settled payments to certain
employees.
Equity-settled employee schemes, including employee share
options and deferred annual bonuses, provide employees
with the option to acquire shares of the Company. Employee
share options and deferred annual bonuses are generally
subject to performance or service conditions.
The fair value of equity-settled payments is measured at the
date of grant and charged to the income statement over the
period during which performance or service conditions are
required to be met or immediately where no performance or
service criteria exist. The fair value of equity-settled payments
granted is measured using the Black–Scholes model. At
the end of each reporting period, the Group revises its
estimate of the number of options that are expected to vest
based on the non-market vesting conditions and service
conditions. It recognises the impact of the revision to the
original estimates, if any, in the income statement, with a
corresponding adjustment to equity.
The Group also operates a share incentive plan under which
employees each have the option to purchase an amount of
shares annually and receive an equivalent number of free
shares. The Group recognises the free shares as an expense
evenly throughout the period over which the employees
must remain in the employ of the Group in order to receive
the free shares.
Interest income and finance costs
Interest income and finance costs are recognised in the
income statement using the effective interest rate method.
Exceptional items
Items are classified as exceptional gains or losses where
they are considered by the Directors to be material or which
individually or, if of a similar type, in aggregate, need to be
disclosed by virtue of their size or incidence if the accounts
are to be properly understood.
Dividends
Dividends on Ordinary shares are recognised in the period in
which they are either paid or formally approved, whichever
is earlier.
Provisions
A provision is recognised in the balance sheet when the
Group has a present legal or constructive obligation as a
result of a past event and it is probable that an outflow of
economic benefits will be required to settle the obligation.
If the effect is material, provisions are determined by
discounting the expected future cash flows at a pre-tax rate
that reflects current market assessments of the time value
of money and, where appropriate, the risks specific to the
liability.
Own shares
The Group makes open market purchases of its own shares
in order to satisfy the requirements of the Group’s existing
share schemes. Own shares are recognised at cost as a
reduction in shareholder equity. The carrying values of own
shares are compared to their market values at each reporting
date and adjustments are made to write down the carrying
value of own shares when, in the opinion of the Directors,
there is a significant market value reduction.
3 Critical accounting judgements and key
sources of estimation uncertainty
In the process of applying the Group’s accounting policies,
which are described in Note 2, the Directors have made the
following judgments that have the most significant effect on
the amounts recognised in the accounts.
Depreciation
Vehicles for hire are depreciated on a straight-line basis using
depreciation rates that reflect economic lives of between
three and 12 years. These depreciation rates have been
determined with the anticipation that the net book values at
the point the vehicles are transferred into inventories is in line
with the open market values for those vehicles, after taking
account of costs required to sell the vehicles.
Under IAS 16 (Property, plant and equipment), the Group is
required to review its depreciation rates and estimated useful
lives regularly to ensure that the net book value of disposals
of tangible assets are broadly equivalent to their market
value.
Depreciation charges reflect adjustments made as a result
of differences between expected and actual residual values
of used vehicles, taking into account the further directly
attributable costs to sell the vehicles.
9594
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWFINANCIALS NOTES TO
THE ACCOUNTS
CONTINUED
3 Critical accounting judgements and key
sources of estimation uncertainty continued
Provision for bad and doubtful debts
Trade receivables are stated in the balance sheet at
their nominal value less any appropriate provision for
irrecoverable amounts. In determining whether provision
is required against any trade receivable, judgement is
required in estimating the likely levels of recovery. In
exercising this judgement, consideration is given to both
the overall economic environment in which a debtor
operates, as well as specific indicators that the recovery of
the nominal balance may be in doubt, for example, days’
sales outstanding in excess of agreed credit terms or other
qualitative information in respect of a customer. See note 29
for further information.
Taxation
The Group carries out tax planning consistent with a group
of its size and makes appropriate provision, based on best
estimates, until tax computations are agreed with the tax
authorities. Certain judgements have been made with
respects to uncertain tax positions. These judgements
primarily related to tax reliefs taken in the current and
previous years in respect of the vehicle fleet. To the extent
that tax estimates result in the recognition of deferred tax
assets, those assets are only carried in the balance sheet to
the extent that it is considered probable that taxable profit
will be available against which the deductible temporary
difference can be utilised.
4 Segmental reporting
Management has determined the operating segments based
upon the information provided to the Board of Directors
which is considered to be the chief operating decision
maker. The Group is managed and reports internally on a
basis consistent with its three main operating divisions, UK,
Spain and Ireland. The principal activities of these divisions
are set out in the Strategic report.
Revenue: hire of vehicles
Revenue: sale of vehicles
Total revenue
Underlying operating profit (loss)*
Exceptional items
Intangible amortisation
Operating profit
Interest income
Finance costs (excluding exceptional
items)
Exceptional finance credit
Profit before taxation
Other information
Capital expenditure
Depreciation
Reportable segment assets
Derivative financial instrument assets
Income tax assets
Total assets
Reportable segment liabilities
Derivative financial instrument liabilities
Income tax liabilities
Total liabilities
UK
2017
£000
272,168
144,043
416,211
43,886
Spain
2017
£000
163,419
63,241
226,660
42,607
Ireland
2017
£000
21,528
4,025
25,553
3,233
Corporate
2017
£000
–
–
–
(5,121)
Eliminations
2017
£000
(995)
–
(995)
–
192,382
90,079
540,935
163,559
56,005
359,430
14,420
10,145
40,940
149
62
–
229,202
155,798
30,937
–
–
–
–
–
Total
2017
£000
456,120
211,309
667,429
84,605
(1,293)
(1,830)
81,482
2
(9,601)
339
72,222
370,510
156,291
941,305
213
13,730
955,248
415,937
2,706
19,988
438,631
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Revenue: hire of vehicles
Revenue: sale of vehicles
Total revenue
Underlying operating profit (loss)*
Restructuring costs
Intangible amortisation
Operating profit
Interest income
Finance costs
Exceptional finance costs
Profit before taxation
Other information
Capital expenditure
Depreciation
Reportable segment assets
Income tax assets
Total assets
Reportable segment liabilities
Derivative financial instrument liabilities
Income tax liabilities
Total liabilities
Restated
UK†
2016
£000
290,714
123,401
414,115
55,392
Spain
2016
£000
140,781
44,110
184,891
41,267
Ireland†
2016
£000
16,691
3,643
20,334
2,759
Corporate
2016
£000
–
–
–
(5,099)
Eliminations
2016
£000
(1,052)
–
(1,052)
–
192,204
90,875
580,335
95,847
45,827
283,591
11,726
7,509
35,837
271,310
119,473
27,525
–
61
–
–
–
–
–
–
Restated
Total
2016
£000
447,134
171,154
618,288
94,319
(1,777)
(1,979)
90,563
3
(11,373)
(1,561)
77,632
299,777
144,272
899,673
15,256
915,019
418,308
3,152
22,534
443,994
* Underlying operating profit (loss) stated before exceptional items and certain intangible amortisation is the measure used by the Board of
Directors to assess segment performance.
† Ireland was previously reported as part of the UK segment.
Segment assets and liabilities exclude derivative financial instrument assets and liabilities and current and deferred tax assets
and liabilities, since these balances are not included in the segments’ assets and liabilities as reviewed by the chief operating
decision maker.
9796
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWFINANCIALS
NOTES TO
THE ACCOUNTS
CONTINUED
4 Segmental reporting continued
Geographical information
Revenues are attributed to countries on the basis of the Company’s location.
United Kingdom
Spain
Republic of Ireland
Eliminations
Revenue
2017
£000
416,211
226,660
25,553
(995)
667,429
Non-current
assets
2017
£000
440,910
328,540
34,367
–
803,817
Revenue
2016
£000
414,115
184,891
20,334
(1,052)
618,288
Non-current
assets
2016
£000
464,526
263,046
30,335
–
757,907
There are no external customers from whom the Group derives more than 10% of total revenue.
5 Operating profit
Operating profit is stated after charging:
Depreciation of property, plant and equipment (Notes 14 and 15)
Amortisation of intangible assets (Note 13)
Staff costs (Note 6)
Cost of inventories recognised as an expense
Net impairment of trade receivables (Note 29)
Auditors’ remuneration for audit services (below)
Auditors’ remuneration for non-audit services (below)
2017
£000
2016
£000
156,291
1,891
93,850
241,064
3,498
356
40
144,272
1,979
89,368
206,849
3,468
324
122
The above cost of inventories recognised as an expense includes movements in stock provisions which are considered immaterial.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Fees payable to the Company’s auditors for the audit of the Company’s annual accounts
Fees payable to the Company’s auditors and its associates for the audit of the Company’s
subsidiaries pursuant to legislation
Total audit fees
Other services pursuant to legislation
Other services
Tax services
Total non-audit fees
2017
£000
218
138
356
21
19
–
40
2016
£000
205
119
324
26
68
28
122
Fees payable to PwC and their associates for non-audit services to the Company are not required to be disclosed because the
consolidated financial statements are required to disclose such fees on a consolidated basis.
A description of the work of the Audit and Risk Committee is set out on pages 51 to 53 and includes an explanation of how
auditor objectivity and independence is safeguarded when non-audit services are provided by the auditors.
6 Staff costs
The average number of persons employed by the Group:
United Kingdom:
Direct operations
Administration
Spain:
Direct operations
Administration
Republic of Ireland:
Direct operations
Administration
2017
Number
Restated
2016
Number
1,313
485
1,798
870
162
1,032
71
16
87
2,917
1,430
460
1,890
806
147
953
62
16
78
2,921
9998
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWFINANCIALS NOTES TO
THE ACCOUNTS
CONTINUED
6 Staff costs continued
The aggregate remuneration of Group employees comprised:
Wages and salaries
Social security costs
Other pension costs – defined contribution plans
2017
£000
80,569
11,376
1,905
93,850
2016
£000
77,569
9,806
1,993
89,368
Wages and salaries include £2,562,000 (2016 – £2,391,000) in respect of redundancies and loss of office.
Details of Directors’ remuneration, pension contributions and share options are provided in the Remuneration report on
pages 54 to 73.
7 Finance costs
Interest on bank overdrafts and loans
Recycling of hedging reserve items
Amortisation of arrangement fees
Preference share dividends
Finance costs (excluding exceptional items)
Interest refunded in relation to Spain tax settlement (Note 26)
Termination of interest rate swaps (Note 26)
Exceptional finance (credit) costs
8 Taxation
Current tax:
UK corporation tax
Adjustment in respect of prior years
Foreign tax
Deferred tax:
Origination and reversal of timing differences
Adjustment in respect of prior years
Rate adjustments in UK and Spain
2017
£000
8,940
–
636
25
9,601
(339)
–
(339)
9,262
2017
£000
8,172
1,234
1,136
10,542
701
127
(49)
779
11,321
2016
£000
10,096
649
603
25
11,373
–
1,561
1,561
12,934
2016
£000
10,823
854
5,023
16,700
1,168
(1,818)
103
(547)
16,153
UK corporation tax is calculated at 19.92% (2016 – 20.00%) of the estimated assessable profit for the year. Taxation for other
jurisdictions is calculated at the rates prevailing in those respective jurisdictions.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG The net charge for the year can be reconciled to the profit before taxation as stated in the income statement as follows:
Profit before taxation
Tax at the UK corporation tax rate of 19.92% (2016 – 20.00%)
Tax effect of expenses that are not deductible in determining
taxable profit
Tax effect of income not taxable in determining taxable profit
Difference in taxation in overseas subsidiary undertakings
Reduction in tax rate
Adjustment to tax charge in respect of prior years
Tax charge and effective tax rate for the year
2017
£000
72,222
14,387
236
(3,643)
(971)
(49)
1,361
11,321
%
19.9
0.3
(5.0)
(1.3)
(0.1)
1.9
15.7
2016
£000
77,632
15,526
1,502
(960)
946
103
(964)
16,153
%
20.0
1.9
(1.2)
1.2
0.1
(1.2)
20.8
In addition to the amount charged to the income statement, a net deferred tax amount of £157,000 has been debited (2016
– £285,000 credited) directly to equity (Note 22).
The underlying tax charge of £12,007,000 (2016 – £17,599,000) excludes exceptional tax credits of £95,000 (2016 –
£668,000) as set out in Note 26, and tax credits on brand royalty charges and intangible amortisation of £591,000 (2016 –
£778,000). There has been no recognition of deferred tax assets previously derecognised.
In July 2015 an announcement was made meaning that the applicable tax rate in the UK will reduce from 20% to 19% for
the fiscal year starting 1 April 2017 and thereafter. This was substantively enacted on 1 April 2017 and therefore deferred
tax balances arising in the UK have been revalued to 19%. In March 2016 it was announced that for the fiscal year starting
1 April 2020 the rate would reduce to 17%. This change has not been substantively enacted at the balance sheet date and
deferred tax balances have therefore not been revalued to this rate. The Spanish corporation tax rate reduced to 25% on 1
January 2016. Based on the expected timing of the reversal of temporary differences, the tax disclosures reflect deferred tax
measured at 19% in the UK and 25% in Spain.
9 Dividends
An interim dividend of 5.7p per Ordinary share was paid in January 2017 (2016 – 5.1p). The Directors propose a final dividend
for the year ended 30 April 2017 of 11.6p per Ordinary share (2016 – 10.9p) which is subject to approval at the Annual
General Meeting and has not been included as a liability as at 30 April 2017. No dividends have been paid between 30 April
2017 and the date of signing the Accounts.
100
101
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWFINANCIALS NOTES TO
THE ACCOUNTS
CONTINUED
10 Earnings per share
Basic and diluted earnings per share
The calculation of basic and diluted earnings per share is based
on the following data:
Earnings
Earnings for the purposes of basic and diluted earnings per share,
being profit for the year attributable to the owners of the Parent
Company
Number of shares
Weighted average number of Ordinary shares for the purposes
of basic earnings per share
Effect of dilutive potential Ordinary shares:
– share options
Weighted average number of Ordinary shares for the purposes
of diluted earnings per share
Basic earnings per share
Diluted earnings per share
Underlying
2017
£000
Statutory
2017
£000
Underlying
2016
£000
Statutory
2016
£000
62,999
60,901
65,350
61,479
2017
Number
2017
Number
2016
Number
2016
Number
133,232,518 133,232,518 133,232,518 133,232,518
1,700,849
1,700,849
1,990,249
1,990,249
134,933,367 134,933,367 135,222,767 135,222,767
46.1p
45.5p
47.3p
46.7p
45.7p
45.1p
49.0p
48.3p
11 Result of the Parent Company
A profit of £38,138,000 (2016 – £37,624,000) is dealt with in the accounts of the Company. The Directors have taken
advantage of the exemption available under s408(3) of the Companies Act 2006 and not presented an income statement for
the Company alone.
12 Goodwill
Carrying value:
At 1 May 2015, 1 May 2016 and 30 April
2017
£000
3,589
Goodwill acquired in a business combination is allocated,
at acquisition, to the cash generating units (CGUs) that are
expected to benefit from the business combination. The
Group tests goodwill annually for impairment, or more
frequently if there are indications that goodwill might be
impaired.
The goodwill balance all relates to the UK. The recoverable
amounts of the CGUs are determined from value in use
calculations. The key assumptions for the value in use
calculations are those regarding the discount rates, growth
rates and expected changes to selling prices and direct costs
during the year. The Directors estimate discount rates using
pre-tax rates that reflect current market assessments of the
time value of money and the risks specific to the CGUs. The
growth rates are based on industry growth rates forecasts.
Changes in selling prices and direct costs are based on past
practices and expectations of future changes in the market.
In addition to the annual test of impairment, and as required
by IAS 36, there has also been an assessment as to whether
there has been any indication that an impairment loss of
other non-current assets recognised in an earlier year has
decreased or no longer exists.
The impairment assessment was based on risk-adjusted cash
flow forecasts derived from a business plan approved by
the Directors in May 2017 using growth rates of 1% over a
10 year period, including terminal values, using a discount
rate of 8.6% for the UK CGU, 9.0% for the Spain CGU and
8.2% for the Ireland CGU. The projected terminal value is
calculated based on the Gordon Growth Model assuming
cash flows are generated into perpetuity.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG 12 Goodwill continued
It was concluded that there were no indicators of additional
impairment or reversal of impairment of other non-current
assets previously charged for the UK CGU, Spain CGU and
Ireland CGU.
In the prior year, the impairment assessment was based on
risk-adjusted cash flow forecasts derived from a three year
business plan approved by the Directors in May 2016 using
growth rates of 1% over a 10 year period, including terminal
values, using a discount rate of 8.9% for the UK CGU (which
included Ireland) and 8.9% for the Spain CGU. The projected
terminal value is calculated based on the Gordon Growth
Model assuming cash flows are generated into perpetuity.
It was concluded that there were no indicators of additional
impairment or reversal of impairment previously charged for
both the UK CGU and Spain CGU.
The value in use assessment is sensitive to changes in the
key assumptions used, most notably the discount rate and
growth rates. A sensitivity analysis has been performed on
the UK CGU, Spain CGU and Ireland CGU. Based on this
sensitivity analysis, no reasonably possible changes to the
assumptions used for either the UK CGU, Spain CGU or
Ireland CGU resulted in an additional impairment charge
being required.
13 Other intangible assets
Cost:
At 1 May 2015
Additions
Exchange differences
At 1 May 2016
Additions
Exchange differences
At 30 April 2017
Amortisation:
At 1 May 2015
Charge for the year
Exchange differences
At 1 May 2016
Charge for the year
Exchange differences
At 30 April 2017
Carrying amount:
At 30 April 2017
At 30 April 2016
Intangible amortisation:
Included within underlying operating profit
Excluded from underlying operating profit
Customer
relationships
£000
GROUP
Other
software
£000
14,484
–
280
14,764
–
630
15,394
11,574
775
279
12,628
775
629
14,032
1,362
2,136
14,096
1,682
91
15,869
1,133
111
17,113
12,665
1,204
82
13,951
1,116
99
15,166
1,947
1,918
COMPANY
Other
software
£000
90
–
–
90
–
–
90
74
16
–
90
–
–
90
–
–
2016
£000
–
1,979
1,979
Total
£000
28,580
1,682
371
30,633
1,133
741
32,507
24,239
1,979
361
26,579
1,891
728
29,198
3,309
4,054
2017
£000
61
1,830
1,891
102
103
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWFINANCIALS
NOTES TO
THE ACCOUNTS
CONTINUED
14 Property, plant and equipment: vehicles for hire
Group
Cost:
At 1 May 2015
Additions
Exchange differences
Transfer to motor vehicles
Transfer to inventories
At 1 May 2016
Additions
Exchange differences
Transfer from motor vehicles
Transfer to inventories
At 30 April 2017
Depreciation:
At 1 May 2015
Charge for the year
Exchange differences
Transfer to motor vehicles
Transfer to inventories
At 1 May 2016
Charge for the year
Exchange differences
Transfer from motor vehicles
Transfer to inventories
At 30 April 2017
Carrying amount:
At 30 April 2017
At 30 April 2016
£000
987,127
293,592
27,464
(663)
(310,394)
997,126
364,499
33,330
22
(360,729)
1,034,248
326,967
137,678
9,850
(170)
(161,698)
312,627
149,742
11,944
57
(171,779)
302,591
731,657
684,499
At 30 April 2017, the Group had entered into contractual commitments for the acquisition of vehicles for hire amounting to
£19,397,000 (2016 – £20,599,000).
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG
15 Other property, plant and equipment
Group
Cost:
At 1 May 2015
Additions
Exchange differences
Transfer from vehicles for hire
Disposals
At 1 May 2016
Additions
Exchange differences
Transfer to vehicles for hire
Disposals
At 30 April 2017
Depreciation:
At 1 May 2015
Charge for the year
Exchange differences
Transfer from vehicles for hire
Disposals
At 1 May 2016
Charge for the year
Net impairment
Exchange differences
Transfer to vehicles for hire
Disposals
At 30 April 2017
Carrying amount:
At 30 April 2017
At 30 April 2016
Land and buildings by category:
Freehold and long leasehold
Short leasehold
Land &
buildings
£000
Plant,
equipment
& fittings
£000
Motor
vehicles
£000
76,799
726
2,580
–
(1,474)
78,631
1,380
3,085
–
(1,704)
81,392
20,811
2,577
600
–
(1,209)
22,779
2,516
131
717
–
(870)
25,273
56,119
55,852
19,798
2,504
755
–
(1,164)
21,893
2,308
932
–
(117)
25,016
11,828
3,318
497
–
(1,026)
14,617
3,307
–
615
–
(44)
18,495
6,521
7,276
3,354
1,273
–
663
(1,489)
3,801
1,190
–
(22)
(1,208)
3,761
1,064
699
–
170
(769)
1,164
726
–
–
(57)
(694)
1,139
2,622
2,637
2017
£000
50,218
5,901
56,119
Total
£000
99,951
4,503
3,335
663
(4,127)
104,325
4,878
4,017
(22)
(3,029)
110,169
33,703
6,594
1,097
170
(3,004)
38,560
6,549
131
1,332
(57)
(1,608)
44,907
65,262
65,765
2016
£000
49,909
5,943
55,852
At 30 April 2017, the Group had entered into contractual commitments for the acquisition of property, plant and equipment
amounting to £35,000 (2016 – £48,000).
Land and buildings in the Group and Company include £2,141,000 (2016 - £Nil) of assets held for sale.
The carrying value of these assets equates to the estimated sale value net of attributable costs to sell.
104
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25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWFINANCIALS NOTES TO
THE ACCOUNTS
CONTINUED
15 Other property, plant and equipment continued
16 Investments
Company
Cost
At 1 May 2015 and 1 May 2016
Additions
At 30 April 2017
Depreciation:
At 1 May 2015
Charge for the year
At 1 May 2016
Charge for the year
Impairment
At 30 April 2017
Carrying amount:
At 30 April 2017
At 30 April 2016
Land &
buildings
£000
3,239
149
3,388
780
61
841
63
343
1,247
2,141
2,398
Company
Cost:
At 1 May 2015, 1 May 2016 and
30 April 2017
Accumulated provisions:
At 1 May 2015, 1 May 2016 and
30 April 2017
Carrying amount:
At 1 May 2016 and 30 April 2017
Shares in
subsidiary
undertakings
£000
Loans
in subsidiary
undertakings
£000
Total
£000
76,328
47,000
123,328
2,435
–
2,435
73,893
47,000
120,893
At 30 April 2017, a full list of subsidiaries of the Group, for all of which the ordinary shares
were wholly owned, was as follows:
Name
Registered office
Northgate (CB) Limited*
Northgate Centre, Lingfield Way, Darlington, DL1 4PZ
Northgate (CB2) Limited*
Northgate Centre, Lingfield Way, Darlington, DL1 4PZ
Northgate España Renting Flexible S.A.*
Avd Isaac Newton, 3 Parque Empresarial La Carpetania,
28906 Getafe, Madrid, Spain
Northgate (Europe) Limited
Northgate Centre, Lingfield Way, Darlington, DL1 4PZ
Northgate (Malta) Limited*
Northgate (MT) Limited*
Office 1, Verdala Business Centre, LM Complex, Brewery
Street, Mriehel, Birkirkara BKR3000, Malta
Office 1, Verdala Business Centre, LM Complex, Brewery
Street, Mriehel, Birkirkara BKR3000, Malta
Northgate Vehicle Hire (Ireland) Limited*
One Earlsfort Centre, Earlsfort Terrace, Dublin 2, Ireland
Northgate Vehicle Hire Limited
Northgate Centre, Lingfield Way, Darlington, DL1 4PZ
NGMalta Finance Limited*
One Earlsfort Centre, Earlsfort Terrace, Dublin 2, Ireland
Northgate Vehicle Sales Limited*
Northgate Centre, Lingfield Way, Darlington, DL1 4PZ
Goode Durrant Administration Limited*
Northgate Centre, Lingfield Way, Darlington, DL1 4PZ
* Interest held indirectly by the Company.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG 17 Inventories
Group
Vehicles held for resale
Spare parts and consumables
18 Trade and other receivables
19 Trade and other payables
2017
£000
28,733
4,933
33,666
2016
£000
17,758
5,351
23,109
Trade payables
Amounts due to subsidiary
undertakings
Social security and other taxes
Accruals and deferred income
GROUP
COMPANY
2017
£000
35,566
–
4,646
24,701
64,913
2016
£000
23,158
–
7,054
22,971
53,183
2017
£000
77
378,570
196
2,313
381,156
2016
£000
125
325,226
239
2,643
328,233
Trade receivables
Amounts due from subsidiary
undertakings
Other taxes
Other receivables and
prepayments
GROUP
COMPANY
2017
£000
53,675
–
–
2016
£000
58,131
–
–
8,981
62,656
5,368
63,499
2017
£000
–
883,224
112
119
883,455
2016
£000
–
825,090
56
129
825,275
Allowances for estimated irrecoverable amounts and the Group’s credit risk are considered in
Note 29.
The Directors consider that the carrying amount of trade and other receivables approximates
to their fair value due to their short term nature.
The Directors consider that the carrying amount of trade and other payables approximates to
their fair value due to their short term nature.
106
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25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWFINANCIALS NOTES TO
THE ACCOUNTS
CONTINUED
20 Borrowings
The Directors consider that the carrying amounts of the Group’s borrowings approximate to their fair value.
Bank loans and overdrafts
Loan notes
Cumulative Preference shares
Confirming facilities
The borrowings are repayable as follows:
On demand or within one year
(shown within current liabilities)
Bank loans and overdrafts
Confirming facilities
In the third to fifth years
Bank loans
Due after more than five years
Loan notes
Cumulative Preference shares
Unamortised finance fees relating to the bank loans and loan notes
Total borrowings
Less: Amounts due for settlement within one year (shown within
current liabilities)
Amounts due for settlement after more than one year
Restated
GROUP
COMPANY
2017
£000
265,765
84,393
500
366
351,024
2016
£000
286,242
77,930
500
453
365,125
2017
£000
253,038
84,393
500
–
337,931
2016
£000
274,527
77,930
500
–
352,957
Restated
GROUP
COMPANY
2017
£000
2016
£000
2017
£000
2016
£000
32,219
366
32,585
46,062
453
46,515
19,492
–
19,492
34,347
–
34,347
235,499
235,499
242,754
242,754
235,499
235,499
242,754
242,754
84,473
500
84,973
(2,033)
351,024
32,585
318,439
78,025
500
78,525
(2,669)
365,125
46,515
318,610
84,473
500
84,973
(2,033)
337,931
19,492
318,439
78,025
500
78,525
(2,669)
352,957
34,347
318,610
The UK syndicated bank loans, totalling £235,499,000 (gross of unamortised fees) at 30 April 2017, would become repayable
in full in the event of a change in control of the Group. The holders of the loan notes, totalling £84,473,000 (gross of
unamortised fees) at 30 April 2017, would have to be offered full repayment in the event of a change in control of the Group.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Bank loans and overdrafts
Bank loans and overdrafts are unsecured and bear interest
at rates of 0.70% to 1.75% (2016 – 0.70% to 2.25%) above
the relevant interest rate index, being LIBOR for Sterling
denominated debt and EURIBOR for Euro denominated debt.
Loan notes
The Company has €100,000,000 of private placement loan
notes which bear interest at 2.38%. These are unsecured
and mature in August 2022.
Cumulative Preference shares
The cumulative Preference shares of 50p each entitle the
holder to receive a cumulative preferential dividend at the
rate of 5% on the paid up capital and the right to a return of
capital at either winding up or a repayment of capital. The
cumulative Preference shares do not entitle the holders to
any further or other participation in the profits or assets of
the Company. These shares have no voting rights other than
in exceptional circumstances.
The total number of authorised cumulative Preference shares
of 50p each is 1,300,000 (2016 – 1,300,000), of which
1,000,000 (2016 – 1,000,000) were allotted and fully paid at
the balance sheet date.
Confirming facilities
Spanish confirming facilities of £366,000 (2016 – £453,000)
are unsecured and all fall due within one year. The Group
pays no interest on confirming.
Total borrowing facilities
The Group has various borrowing facilities available to it. The
undrawn committed facilities at the balance sheet date, in
respect of which all conditions precedent had been met at
that date, are as follows:
Less than one year
In one year to five years
2017
£000
25,416
215,000
240,416
2016
£000
5,200
195,494
200,694
The total amount permitted to be borrowed by the
Company and its subsidiary undertakings in terms of
the Articles of Association shall not exceed six times the
aggregate of the issued share capital of the Company and
Group reserves, as defined in those Articles.
Analysis of consolidated net debt
An analysis of movements in the Group’s consolidated net debt is as follows:
Bank loans
Bank overdrafts
Loan notes
Cumulative Preference shares
Confirming facilities
Cash at bank and in hand
Consolidated net debt
Restated
At 1 May
2016
£000
249,742
36,500
77,930
500
453
365,125
(55,248)
309,877
Cash
flow
£000
(21,369)
(16,420)
–
–
–
(37,789)
16,747
(21,042)
Other
non-cash
changes
£000
621
–
15
–
(125)
511
–
511
Foreign
exchange
movements
£000
15,242
1,449
6,448
–
38
23,177
(2,665)
20,512
At 30 April
2017
£000
244,236
21,529
84,393
500
366
351,024
(41,166)
309,858
The Group calculates gearing to be net borrowings as a percentage of shareholders’ funds less goodwill and the net book
value of intangible assets, where net borrowings comprise borrowings less cash and bank balances. At 30 April 2017, the
gearing of the Group amounted to 60.8% (2016 – 66.9%) where net borrowings are £309,858,000 (2016 – £309,877,000)
and shareholders’ funds less goodwill and the net book value of intangible assets are £509,719,000 (2016 – £463,382,000).
Financial instruments (see also Note 29)
Financial assets
The Group’s principal financial assets are cash and bank balances, and trade and other receivables.
The Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net
of allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss event which,
based on previous experience, is evidence of a reduction in the recoverability of the cash flows.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high
credit ratings assigned by international credit rating agencies.
The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and
customers. The Group has credit insurance policies in place to partially mitigate this risk.
Treasury policies and the management of risk
The function of Group Treasury is to mitigate financial risk, to ensure sufficient liquidity is available to meet foreseeable
requirements, to secure finance at minimum cost and to invest cash assets securely and profitably. Treasury operations
manage the Group’s funding, liquidity and exposure to interest rate risks within a framework of policies and guidelines
authorised by the Board of Directors.
The Group uses derivative financial instruments for risk management purposes only. Consistent with Group policy, Group
Treasury does not engage in speculative activity and it is policy to avoid using more complex financial instruments. Further
details regarding derivative financial instruments are shown in Note 21.
108
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25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWFINANCIALS NOTES TO
THE ACCOUNTS
CONTINUED
20 Borrowings continued
The policy followed in managing credit risk permits only
minimal exposures, with banks and other institutions
meeting required standards as assessed normally by
reference to major credit rating agencies. Deals are
authorised only with banks with which dealing mandates
have been agreed and which maintain an A rating. Individual
aggregate credit exposures are limited accordingly.
Financing and interest rate risk
The Group’s policy is to finance operating subsidiary
undertakings by a combination of retained earnings and
medium term bank loans and loan notes.
Cash at bank, and on deposit, yields interest based principally
on interest rate indices applicable to periods of less than three
months, those indices being LIBOR for Sterling denominated
cash and EURIBOR for Euro denominated cash. The Group’s
exposure to interest rate fluctuations on its borrowings
is managed through the use of interest rate derivatives
as detailed in Note 21. These derivatives are also used to
manage the Group’s desired mix of fixed and floating rate
debt. The policy is to fix or cap a substantial element of the
interest cost on outstanding debt. At 30 April 2017 102.9%
(2016 – 96.7%) of net borrowings were at fixed rates of
interest comprising interest rate swaps of £75,000,000 and
€190,000,000, loan notes of €100,000,000, £500,000
of Preference shares and £366,000 of confirming facilities
(30 April 2016 – interest rate swaps of £75,000,000 and
€190,000,000, loan notes of €100,000,000, £500,000 of
Preference shares and £453,000 of confirming facilities).
Foreign currency exchange risk
The Group maintains borrowings in the same currency as
its cash requirements, with the exception of borrowings
maintained in Euros as net investment hedges against its
Euro denominated investments (Note 21).
An analysis of the Group’s borrowings by currency is given below:
Group
At 30 April 2017
Bank loans
Bank overdrafts
Cumulative Preference shares
Confirming facilities
Loan notes
Group Restated
At 30 April 2016
Bank loans
Bank overdrafts
Cumulative Preference shares
Confirming facilities
Loan notes
Sterling
£000
Euro
£000
Total
£000
74,523
2,038
500
–
–
77,061
Sterling
£000
74,376
8,286
500
–
–
83,162
169,713
19,491
–
366
84,393
273,963
Euro
£000
175,366
28,214
–
453
77,930
281,963
244,236
21,529
500
366
84,393
351,024
Total
£000
249,742
36,500
500
453
77,930
365,125
21 Derivative financial instruments
The Group’s derivative financial instruments at the balance sheet date comprise interest rate swaps and cross-currency swaps.
Their net estimated fair values are as follows:
Interest rate derivatives
Cross-currency derivatives
They are represented in the balance sheet as follows:
Current derivative financial instrument assets
Non-current derivative financial instrument liabilities
GROUP
COMPANY
2017
£000
(2,706)
213
(2,493)
213
(2,706)
(2,493)
2016
£000
(3,152)
–
(3,152)
–
(3,152)
(3,152)
2017
£000
(2,706)
213
(2,493)
213
(2,706)
(2,493)
2016
£000
(3,152)
–
(3,152)
–
(3,152)
(3,152)
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Interest rate derivatives
The Group’s exposure to interest fluctuations on its borrowings is managed through the use of interest rate derivatives. These
derivatives are also used to manage the Group’s desired mix of fixed and floating rate debt. The policy is to fix a substantial
element of the interest cost on outstanding debt. The interest rate derivatives to which the Group was party as at 30 April
2017 are summarised below:
At 30 April 2017
Sterling interest rate swaps
Euro interest rate swaps
At 30 April 2016
Sterling interest rate swaps
Euro interest rate swaps
Total nominal
values
Weighted
average fixed
contract net
pay rates
Weighted
average
remaining
life
£75,000,000
€190,000,000
£75,000,000
€190,000,000
1.17%
0.06%
1.17%
0.06%
3.2 years
3.2 years
4.2 years
4.2 years
In October 2015 interest rate swaps totalling £105,000,000 and €206,500,000 were cancelled and interest rate swaps
totalling £75,000,000 and €190,000,000 commenced. These had weighted average pay rates of 1.17% and 0.06%
respectively and all had weighted average lives of 4.7 years.
All the Group’s interest rate swaps are designated as cash flow hedges and their fair value to the point of either maturity
or termination, along with changes in fair value in the current year, has been deferred in equity. There was no hedge
ineffectiveness during the year (2016 – £Nil).
Cross-currency derivatives
Market values have been used to determine the fair values of the cross-currency derivatives at the balance sheet date. The
estimated fair values are as follows:
Euro/Sterling cross-currency swaps
2017
£000
213
2016
£000
–
In April 2017 a cross-currency swap with a principal value of €25,000,000 commenced. The Group will have interest cash
inflows in Sterling and interest cash outflows in Euro over the life of the contract. On the termination date of the contract, the
Group will pay a principal amount in Euro and receive a principal amount in Sterling. The interest rate that the Group pays in
Euro is 2.15% and the interest rate the Group receives in Sterling is 2.92%. The swap had a life of 0.5 years. The change in fair
value has been deferred in equity.
110
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25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWFINANCIALS NOTES TO
THE ACCOUNTS
CONTINUED
21 Derivative financial instruments continued
Net investment hedges
The Group manages its exposure to currency fluctuations
on retranslation of the balance sheets of those subsidiary
undertakings whose functional currency is in Euros by
maintaining a proportion of its borrowings in the same
currency. The hedging objective is to reduce the risk of
spot retranslation of the Euro subsidiaries from Euros to
Sterling at each reporting date. Exchange differences arising
on the borrowings and net investment hedges have been
recognised directly within equity along with the exchange
differences on retranslation of the net assets of the Euro
subsidiaries.
The hedges are considered highly effective in the current and
prior year.
22 Deferred tax
The following are the major deferred tax liabilities and (assets) recognised by the Group and movements thereon during the
current and prior year:
Group
At 1 May 2015
(Credit) charge to income
Credit to equity
Exchange differences
Adjustment to tax rate charged
(credited) to income
Adjustments in respect of prior years
credited to income
At 1 May 2016
(Credit) charge to income
Charge to equity
Exchange differences
Adjustment to tax rate (credited)
charged to income
Adjustment to tax rate charged
(credited) to equity
Adjustments in respect of prior years
charged (credited) to income
At 30 April 2017
Accelerated
capital
allowances
£000
2,489
(1,908)
–
(268)
Revaluation
of buildings
£000
1,156
(28)
–
21
Share based
payments
£000
(687)
(186)
–
–
Intangible
assets
£000
562
(155)
–
(1)
Other
temporary
differences
£000
(4,271)
1,110
(285)
(155)
Losses
£000
(9,509)
2,335
–
(577)
Total
£000
(10,260)
1,168
(285)
(980)
96
–
(1,804)
(1,395)
(2,425)
–
(357)
(57)
–
–
1,149
4
–
26
(42)
–
325
(3,909)
–
1,137
–
–
(873)
476
–
–
34
–
(343)
(706)
–
(56)
63
103
–
406
(154)
–
(2)
(14)
–
–
(7,807)
2,862
–
(653)
–
–
(14)
(3,552)
(62)
132
(188)
(1,818)
(12,072)
701
132
(1,174)
30
25
(49)
25
–
236
–
(5,598)
145
(3,470)
127
(12,310)
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so. The analysis of the
deferred tax balances after offset is as follows:
At 30 April 2017
Deferred tax assets
Deferred tax liabilities
Net deferred tax assets
At 30 April 2016
Deferred tax assets
Deferred tax liabilities
Net deferred tax assets
Total
£000
(13,730)
1,420
(12,310)
(15,256)
3,184
(12,072)
In the current year, the net charge to equity of £157,000 (2016 – £285,000 credit) in respect of other temporary differences
relates to derivative financial instruments which has been reflected in the hedging reserve (Note 25).
There are no deferred tax assets which are not recognised in the balance sheet.
Net deferred tax assets of £3,470,000 (2016 – £3,552,000) classified as other temporary differences relate to movements on
fair values of foreign currency derivatives, other temporary differences in relation to tax payable in various tax jurisdictions in
which the Group operates and other temporary differences within the UK.
The following are the major deferred tax assets recognised by the Company and movements thereon during the current and
prior year:
Company
At 1 May 2015
Credit to income
Credit to equity
At 1 May 2016
Charge to income
Charge to equity
At 30 April 2017
Share based
payments
£000
(687)
(186)
–
(873)
167
–
(706)
Other
temporary
differences
£000
(371)
(159)
(285)
(815)
58
157
(600)
Total
£000
(1,058)
(345)
(285)
(1,688)
225
157
(1,306)
112
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25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWFINANCIALS NOTES TO
THE ACCOUNTS
CONTINUED
23 Share capital
Group and Company
Alloted and fully paid:
133,232,518 (2016 – 133,232,518) Ordinary shares of 50p each
24 Share premium account
Group and Company
At 1 May 2015, 1 May 2016 and 30 April 2017
25 Other reserves
Group
At 1 May 2015
Foreign exchange differences
At 1 May 2016
Foreign exchange differences
At 30 April 2017
Company
At 1 May 2015, 1 May 2016 and 30 April 2017
Capital
redemption reserve
£000
40
–
40
–
40
Capital
redemption reserve
£000
40
Revaluation
reserve
£000
956
70
1,026
85
1,111
Revaluation
reserve
£000
1,371
2017
£000
2016
£000
66,616
66,616
£000
113,508
Merger
reserve
£000
67,463
–
67,463
–
67,463
Merger
reserve
£000
63,159
The above shows the movements on the reserves classified as ‘Other reserves’ on the Group’s Statement of changes in equity.
Movements on the own shares reserve, hedging reserve and translation reserve are shown in the Statements of changes in
equity, which can be seen on page 91.
Further information on certain of these reserves is given
below:
Own shares
The own shares reserve represents shares held by employee
trusts in order to meet commitments under the Group’s
various share schemes (Note 28). At 30 April 2017 the
Guernsey Trust held 708,221 (2016 – 1,899,747) 50p
Ordinary shares and the Capita Trust held 31,479 (2016 –
17,186) 50p Ordinary shares. The total number of shares held
by these employee trusts represents 0.6% (2016 – 1.4%) of
the allotted and fully paid share capital of the Group.
The results of the trusts are consolidated into the results of
the Group in accordance with IFRS 10 (Consolidated Financial
Statements).
Hedging reserve
The hedging reserve represents the cumulative amounts of
changes in fair values of hedged interest rate derivatives that
are deferred in equity, as explained in Note 2 and Note 21,
less amounts transferred to the income statement and other
components of equity.
Translation reserve
The translation reserve represents the aggregate of
the cumulative exchange differences arising from the
retranslation of the balance sheets of the Euro based
subsidiary undertakings and the cumulative exchange
differences arising from long term borrowings held as
hedges and the foreign exchange element of fair value
movements of hedged derivatives.
The management of the Group’s foreign exchange
translation risks is detailed in Note 21.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG
26 Exceptional items
Restructuring costs
Spain tax settlement
Exceptional administrative expenses
Interest refunded in relation to Spain tax
settlement
Termination of interest rate swaps
Exceptional finance (credit) costs
Total pre-tax exceptional items
Tax credits relating to exceptional items
2017
£000
2,189
(896)
1,293
(339)
–
(339)
954
(95)
2016
£000
1,777
–
1,777
–
1,561
1,561
3,338
(668)
Details of exceptional items recognised in the income statement are as
follows:
Restructuring costs
The Group incurred total exceptional restructuring costs of £2,189,000 (2016
– £1,777,000), all of which related to staff costs and arose in the United
Kingdom.
Spain tax settlement
The Spain tax settlement followed the resolution of an historic tax case with
the Spanish tax authorities.
Interest refunded in relation to Spain tax settlement
This relates to interest refunded by the Spanish tax authorities on the
settlement of the case disclosed above.
Costs associated with July 2015 refinancing
The Group incurred £Nil (2016 – £1,561,000) of exceptional finance costs
relating to the cancellation of previous interest rate swaps which no longer
qualified for hedge accounting as the hedged items were deemed to no
longer exist.
27 Operating lease arrangements
As lessee
Group
Lease payments under operating leases recognised in the income statement for
the year
2017
£000
2016
£000
7,163
6,422
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments
under non-cancellable operating leases, which fall due as follows:
Group
Within one year
In the second to fifth years inclusive
After five years
2017
£000
7,011
20,347
21,731
49,089
2016
£000
6,020
17,011
20,863
43,894
Operating lease payments represent rentals payable by the Group for certain of its operating sites as well as
rentals for certain equipment.
Leases are negotiated for an average term of 9 years (2016 – 11 years) and rentals are fixed for an average
term of 9 years (2016 – 10 years).
As lessor
The revenue of the Group is principally generated from the hire of vehicles under operating lease
arrangements. For the majority of vehicles hired there is no minimum contracted rental period. The revenue
of the Group under these arrangements is as shown in the income statement. There are no contingent rentals
recognised in income.
114
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25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWFINANCIALS NOTES TO
THE ACCOUNTS
CONTINUED
28 Share based payments
The Group’s and Company’s various share incentive plans are
explained in the Remuneration report on pages 54 to 73.
The Group and Company recognised total expenses of
£1,934,000 (2016 – £1,666,000) related to equity-settled
share based payment transactions in the year.
All options granted under the MPSP and EPSP are nil cost
options. Options granted under the DABP have exercise
prices ranging from £Nil to £5.75.
The All Employee Share Scheme (AESS) has a 12 month
accumulation period. Partnership shares are purchased by
the employee at the end of the accumulation period from
the amount contributed by the employee during that period.
The Company allocates an amount of free matching shares
equivalent to the number of partnership shares purchased.
The vesting period for matching shares is three years.
Matching shares are forfeited if the employee either sells the
related partnership shares or leaves the Group before the
three years have elapsed.
The Board may make discretionary awards of free shares to
eligible employees. Employees must remain in the employ of
the Group during the vesting period of three years in order
to receive the free shares.
Details regarding the plans in the year ended 30 April 2017 are outlined below:
At 1 May 2016
Granted/allocated during the year
Exercised/vested during the year
Forfeited/lapsed during the year
At 30 April 2017
Exercisable at the end of the year
Weighted average remaining contractual life at the end of
the year
Weighted average share price at the date of exercise of
options in the year
Date options granted/allocated during the year
DABP
Number
of share
options
2017
595,521
107,625
(467,993)
(13,169)
221,984
18,744
MPSP
Number
of share
options
2017
184,174
–
(85,498)
–
98,676
98,676
EPSP
Number
of share
options
2017
882,433
485,209
(426,665)
(63,067)
877,910
–
AESS
Number of
matching
shares
2017
234,044
118,306
(76,198)
(36,575)
239,577
–
Free Shares
Number of
free shares
2017
288,750
223,355
(115,385)
(50,120)
346,600
–
DABP
2017
MPSP
2017
EPSP
2017
AESS
2017
Free Shares
2017
8.0 years
5.1 years
8.6 years
2.0 years
1.6 years
£4.58
July 2016
£4.58
–
£4.58
July 2016/
January
2017*
£5.05
January
2017
£4.50
August
2016
Aggregate estimated fair value of options at the date of
grant
£221,000
– £1,017,000
£535,000
£648,000
The inputs into the Black–Scholes model were as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
Expected dividends
£3.46
£0.52
48.5%
3 years
0.39%
4.0%
–
–
–
–
–
–
£3.46
£Nil
48.5%
3 years
0.39%
4.0%
£5.17
£Nil
47.9%
3 years
0.63%
4.5%
£4.10
£Nil
48.8%
3 years
0.17%
4.1%
*36,107 share options were granted in January 2017 under the EPSP scheme on the appointment of the new CEO.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous
three years.
Details regarding the plans in the year ended 30 April 2016 are outlined below:
At 1 May 2015
Granted/allocated during the year
Exercised/vested during the year
Forfeited/lapsed during the year
At 30 April 2016
Exercisable at the end of the year
DABP
Number
of share
options
2016
398,355
253,812
(56,646)
–
595,521
237,632
MPSP
Number
of share
options
2016
587,046
–
(51,970)
(350,902)
184,174
184,174
EPSP
Number
of share
options
2016
1,142,683
186,525
(231,816)
(214,959)
882,433
197,599
AESS
Number of
matching
shares
2016
254,360
115,264
(115,497)
(20,083)
234,044
–
Free Shares
Number of
free shares
2016
457,400
113,400
(238,600)
(43,450)
288,750
–
Weighted average remaining contractual life at the end
of the year
Weighted average share price at the date of exercise of
options in the year
Date options granted/allocated in the year
Aggregate estimated fair value of options at the date of
grant
The inputs into the Black–Scholes model were as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
Expected dividends
DABP
2016
MPSP
2016
EPSP
2016
AESS
2016
Free Shares
2016
7.7 years
6.0 years
7.7 years
1.9 years
1.2 years
£4.83
July
2015
£617,000
£5.65
£2.31
46.7%
3 years
1.53%
2.9%
£4.83
–
–
–
–
–
–
–
–
£4.83
July
2015
£3.36
January
2016
£4.62
August
2015
£658,000
£378,000
£440,000
£5.65
£Nil
46.7%
3 years
1.53%
2.9%
£5.31
£Nil
45.7%
3 years
1.03%
3.0%
£5.69
£Nil
46.2%
3 years
1.38%
2.9%
116
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25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWFINANCIALS NOTES TO
THE ACCOUNTS
CONTINUED
29 Financial instruments
The following disclosures and analysis relate to the Group’s financial instruments.
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while
maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of
the Group consists of debt, which includes the borrowings disclosed in Note 20, cash and cash equivalents and equity
attributable to equity holders of the Parent, comprising issued share capital, reserves and retained earnings as disclosed in
Notes 23 to 25.
Foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations
arise. Exchange rate exposures are managed within approved policy parameters as discussed in Notes 20 and 21.
Foreign currency sensitivity analysis
During the year, the Group has been exposed to movements in the exchange rate between Euro and Sterling, where Sterling
is the functional currency of the Group.
The following tables detail the Group’s sensitivity to a €0.20 (2016 – €0.15) increase and decrease in the Euro/Sterling
exchange rate.
A €0.20 (2016 – €0.15) movement in the rate in either direction is management’s assessment of the reasonably possible
change in foreign exchange rates in the near term. The sensitivity analysis includes only any outstanding foreign currency
denominated monetary items and adjusts their translation at the period end for a €0.20 (2016 – €0.15) change in foreign
currency rates.
2017
Profit before taxation
Total equity
2016
Profit before taxation
Total equity
As stated in
annual report
£000
72,222
516,617
As would be
stated if
€0.20
increase
£000
66,510
495,570
As would be
stated if
€0.20
decrease
£000
80,265
546,228
As stated in
annual report
£000
77,632
471,025
As would be
stated if
€0.15
increase
£000
75,047
462,602
As would be
stated if
€0.15
decrease
£000
80,629
481,687
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG Interest rate risk management
The Group is exposed to interest rate risk, as entities within the Group borrow funds at both fixed and floating interest rates.
The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings and by the
use of interest rate swap contracts. Hedging activities are reviewed regularly to align with interest rate views and defined risk
appetite, ensuring optimal hedging strategies are applied.
The Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management
section of this note.
Interest rate sensitivity analysis
The sensitivity analyses below have been determined on the exposure to interest rates for floating rate liabilities and related
derivatives. For the floating rate liabilities, the analysis is prepared on the basis of both the average liability outstanding over
the year and the average rate applicable for the year. In all instances it is assumed that any derivatives designated in hedging
relationships are 100% effective.
A 1.0% (2016 – 1.0%) increase or decrease has been used in the analyses and represents management’s best estimate of a
reasonably possible change in interest rates in the near term.
2017
Profit before taxation
Total equity
2016
Profit before taxation
Total equity
As stated in
annual report
£000
72,222
516,617
As would be
stated if
1.0%
increase
£000
72,002
516,442
As would be
stated if
1.0%
decrease
£000
72,443
516,795
As stated in
annual report
£000
77,632
471,025
As would be
stated if
1.0%
increase
£000
77,200
470,680
As would be
stated if
1.0%
decrease
£000
78,062
471,370
Interest rate swap contracts
Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest
amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing
interest rates and the cash flow exposures on the issued variable rate debt held. The fair value of interest rate swaps at the
reporting date is determined by discounting the future cash flows using the curves at the reporting date and the credit risk
inherent in the contract and is disclosed below. The average interest rate is based on the outstanding balances at the end of
the financial year.
118
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25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWFINANCIALS
NOTES TO
THE ACCOUNTS
CONTINUED
29 Financial instruments continued
The following table details the notional principal amounts and remaining terms of interest rate swap contracts outstanding at
the reporting date:
Outstanding receive floating pay fixed
contracts
Sterling
In the second to fifth years inclusive
Euro
In the second to fifth years inclusive
2017
%
1.17
0.06
Average contract
fixed interest rate
Notional principal
amount
2016
%
2017
000
2016
000
Fair value
2017
£000
2016
£000
1.17
£75,000
£75,000
(1,377)
(1,001)
0.06
€190,000
€190,000
(1,329)
(2,151)
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, who have built an appropriate liquidity
risk management framework for the management of the Group’s short, medium and long term funding and liquidity
requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing
facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and
financial liabilities. Included in Note 20 is a description of additional undrawn facilities that the Group has at its disposal to
further reduce liquidity risk.
Liquidity and interest risk tables
The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can
be required to pay. The tables include both interest and principal cash flows. All interest cash flows and the weighted average
effective interest rate have been calculated using interest rate conditions prevailing at the balance sheet date.
2017
Non-interest bearing
Fixed interest rate instruments
Variable interest rate instruments
Restated
2016
Non-interest bearing
Fixed interest rate instruments
Variable interest rate instruments
Weighted
average
effective
interest rate
0.00%
2.40%
1.54%
Weighted
average
effective
interest rate
0.00%
2.40%
1.64%
<1 year
£000
57,461
2,035
14,518
74,014
<1 year
£000
60,111
1,882
13,723
75,716
2nd year
£000
–
2,035
3,714
5,749
2nd year
£000
–
1,882
4,053
5,935
3–5 years
£000
–
6,106
239,838
245,944
3–5 years
£000
–
5,646
251,543
257,189
>5 years
£000
–
87,492
–
87,492
>5 years
£000
–
80,851
–
80,851
Total
£000
57,461
97,668
258,070
413,199
Total
£000
60,111
90,261
269,319
419,691
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG
The following tables detail the Group’s liquidity analysis for its derivative financial instruments. It includes both liabilities and
assets to illustrate how the cash flows are matched in each period. The table has been drawn up based on the undiscounted
net cash inflows (outflows) on the derivative instruments that settle on a net basis and the undiscounted gross cash inflows
(outflows) on those derivatives that require gross settlement.
2017
Liabilities
Net settled:
Interest rate swaps
Gross settled
Cross-currency derivatives
Assets
Gross settled:
Cross-currency derivatives
2016
Liabilities
Net settled:
Interest rate swaps
<1 year
£000
2nd year
£000
3–5 years
£000
Total
£000
1,377
1,324
1,253
3,954
21,345
21,573
–
–
–
–
<1 year
£000
2nd year
£000
3–5 years
£000
21,345
21,573
Total
£000
1,091
1,091
2,226
4,408
Fair value of financial instruments
The Group is required to analyse financial instruments that are measured subsequent to initial recognition at fair value,
grouped into Levels 1 to 3 based on the degree to which fair value is observable:
| Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or
liabilities;
| Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are
observable for the asset or liability either directly (i.e. prices) or indirectly (i.e. derived from prices); and
| Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable inputs).
All the financial instruments below are categorised as Level 2.
The fair values of financial assets and financial liabilities are determined as follows:
| Derivative financial instruments are measured at the present value of future cash flows estimated and discounted based on
applicable yield curves derived from quoted interest rates; and
| The fair value of other non-derivative financial assets and financial liabilities are determined in accordance with generally
accepted pricing models based on discounted cash flow analysis.
The carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements
approximate their fair values or, in the case of interest rate and cross currency swaps, are held at fair value.
120
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25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWFINANCIALS NOTES TO
THE ACCOUNTS
CONTINUED
29 Financial instruments continued
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to
the Group.
The Group’s credit risk is primarily attributable to its trade receivables. The trade receivables amounts presented in the
balance sheet are net of allowances for doubtful receivables. An allowance for impairment is made where there is an
identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows.
Trade receivables
Trade receivables (maximum exposure to credit risk)
Allowance for doubtful receivables
Ageing of trade receivables not impaired
Not overdue
Past due not more than two months
Past due more than two months but not more than four months
Past due more than four months but not more than six months
2017
£000
2016
£000
67,623
(13,948)
53,675
41,369
10,624
(235)
1,917
53,675
71,004
(12,873)
58,131
52,088
4,552
221
1,270
58,131
Before accepting any new customers, the Group will perform credit analysis to assess the credit risk on an individual basis.
This enables the Group only to deal with creditworthy customers therefore reducing the risk of financial loss from defaults. Of
the trade receivables balance at the end of the year, £936,000 (2016 – £802,000) is due from the Group’s largest customer.
There are no customers who represent more than 5% of the total balance of trade receivables.
The Group has no significant concentration of credit risk as trade receivables consist of a large number of customers, spread
across diverse industries and geographical areas in the UK, Spain and Ireland.
Included in the Group’s trade receivables balance are debtors with a carrying amount of £12,306,000 (2016 – £6,043,000)
which are past due at the reporting date for which the Group has not provided as there has not been a significant change in
credit quality and the amounts are still considered recoverable.
Movement in the allowance for doubtful receivables
At 1 May
Impairment losses recognised
Amounts written off as uncollectible
Impaired losses reversed
Exchange differences
At 30 April
2017
£000
2016
£000
12,873
4,483
(3,178)
(985)
755
13,948
12,615
4,837
(3,846)
(1,369)
636
12,873
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG In determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade
receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to
the customer base being large and mainly unrelated. Accordingly, the Directors believe that there is no further credit provision
required in excess of the allowance for doubtful receivables.
Included in the allowance for doubtful receivables are trade receivables with customers which have been placed under
liquidation of £448,000 (2016 – £159,000).
Ageing of impaired trade receivables
Not overdue
Past due not more than two months
Past due more than two months but not more than four months
Past due more than four months but not more than six months
Past due more than six months but not more than one year
2017
£000
2016
£000
3
449
4,130
554
8,812
13,948
138
1,856
2,434
250
8,195
12,873
The Directors consider that the carrying amount of trade and other receivables approximates their fair value. The Company
has no trade receivables and no intercompany receivables past due date.
30 Related party transactions
Transactions with subsidiary undertakings
Transactions between the Company and its subsidiary undertakings, which are related parties, are £3,067,000 (2016 –
£3,447,000) interest payable and £6,204,000 (2016 – £5,282,000) royalty charges receivable.
Balances with subsidiary undertakings at the balance sheet date are shown in Notes 18 and 19.
Remuneration of key management personnel
In the current and prior year, the Directors of Northgate plc are determined to be the key management personnel of the
Group. There are other senior executives in the Group who are able to influence the Company in the achievement of its goals.
However, in the opinion of the Directors, only the Directors of the Company have significant authority for planning, directing
and controlling the activities of the Group.
In respect of the compensation of key management personnel, the short term employee benefits, post-employment (pension)
benefits, termination benefits and details of share options granted are set out in the Remuneration report on pages 54 to
73. The fair value charged to the income statement in respect of equity-settled share based payment transactions with the
Directors is £247,000 (2016 – £660,000). There are no other long term benefits accruing to key management personnel,
other than as set out in the Remuneration report.
122
123
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWFINANCIALS NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the one hundred and nineteenth
Annual General Meeting of Northgate plc (‘the Company‘)
will be held at 10 Paternoster Square, London EC4 at 11.30
am on 19 September 2017 for the purpose of considering
and, if thought fit, passing the following resolutions, of
which resolutions 1 to 13 will be proposed as ordinary
resolutions and resolutions 14 to 17 will be proposed as
special resolutions:
or agreement which would or might require shares to
be allotted or rights to subscribe for or convert securities
into shares to be granted after such expiry and the Board
may allot shares or grant rights to subscribe for or convert
securities into shares in pursuance of such an offer or
agreement as if the authority conferred hereby had not
expired.
15. That subject to the passing of Resolution 14 the Board
1. To receive the Directors’ Report and audited accounts of
the Company for the year ended 30 April 2017.
2. To declare a final dividend of 11.6p per Ordinary share.
3. To approve the Directors’ Remuneration Report in the
form set out on pages 54 to 73 of the 2017 Annual
Report and Accounts.
4. To approve the Directors’ Remuneration Policy in the form
set out on pages 56 to 64 of the Directors’ Remuneration
Report in the 2017 Annual Report and Accounts.
5. To appoint PricewaterhouseCoopers LLP as auditor of the
Company to hold office until the conclusion of the next
Annual General Meeting.
6. To authorise the Audit and Risk Committee to determine
the remuneration of the auditor.
7. To re-elect Mr A Page as a director.
8. To re-elect Mr AJ Allner as a director.
9. To re-elect Miss J Caseberry as a director.
10. To re-elect Mrs C Miles as a director.
11. To re-elect Mr B Spencer as a director.
12. To re-elect Mr P Gallagher as a director.
13. To elect Mr K Bradshaw as a director.
14. That the Board be and it is hereby generally and
unconditionally authorised pursuant to s551 of the
Companies Act 2006 (‘the Act’) to exercise all powers
of the Company to allot shares in the Company and to
grant rights to subscribe for or to convert any security
into shares in the Company up to an aggregate nominal
amount of £22,000,000 provided that this authority shall
expire on the date of the next Annual General Meeting
of the Company after the passing of this resolution save
that the Company may before such expiry make an offer
be authorised to allot equity securities (as defined in the
Companies Act 2006) for cash under the authority given
by that resolution and/or to sell ordinary shares held by
the Company as treasury shares for cash as if section 561
of the Companies Act 2006 did not apply to any such
allotment or sale, such authority to be limited:
a. to the allotment of equity securities in favour of
Ordinary shareholders where the equity securities
respectively attributable to the interests of all Ordinary
shareholders are proportionate (as nearly as may be)
to the respective numbers of Ordinary shares held by
them; and
b. to the allotment of equity securities or sale of treasury
shares (otherwise than under paragraph (a) above) up
to a nominal amount of £3,330,000, such authority to
expire at the end of the next Annual General Meeting
of the Company (or, if earlier, at the close of business
on 19 December 2018) but, in each case, prior to its
expiry the Company may make offers, and enter into
agreements, which would, or might, require equity
securities to be allotted (and treasury shares to be
sold) after the authority expires and the Board may
allot equity securities (and sell treasury shares) under
any such offer or agreement as if the authority had
not expired.
16. That subject to the passing of Resolution 14, the Board
be authorised in addition to any authority granted under
Resolution 15 to allot equity securities (as defined in the
Companies Act 2006) for cash under the authority given
by that resolution and/or to sell ordinary shares held by
the Company as treasury shares for cash as if section 561
of the Companies Act 2006 did not apply to any such
allotment or sale, such authority to be:
a.
limited to the allotment of equity securities or
sale of treasury shares up to a nominal amount of
£3,330,000; and
b. used only for the purposes of financing (or
refinancing, if the authority is to be used within six
months after the original transaction) a transaction
which the Board of the Company determines to
be an acquisition or other capital investment of a
kind contemplated by the Statement of Principles
on Disapplying Pre-Emption Rights most recently
published by the Pre-Emption Group prior to the date
of this notice,
such authority to expire at the end of the next Annual
General Meeting of the Company (or, if earlier, at the
close of business on 19 December 2018) but, in each
case, prior to its expiry the Company may make offers,
and enter into agreements, which would, or might,
require equity securities to be allotted (and treasury
shares to be sold) after the authority expires and the
Board may allot equity securities (and sell treasury shares)
under any such offer or agreement as if the authority had
not expired.
17. That a general meeting, other than an Annual General
Meeting, may be called on not less than 14 clear days’
notice.
18. That the Company be generally and unconditionally
authorised to make market purchases (within the
meaning of s693(4) of the Companies Act 2006) of
Ordinary shares of 50p each of the Company on such
terms and in such manner as the Directors may from time
to time determine, provided that:
a. the maximum number of Ordinary shares hereby
authorised to be acquired is 13,300,000, representing
approximately 10% of the issued Ordinary share
capital of the Company as at 26 June 2017;
b. the minimum price which may be paid for any such
Ordinary share is 50p;
c. the maximum price (excluding expenses) which may
be paid for any such Ordinary share is an amount
equal to 105% of the average of the middle market
quotations for an Ordinary share in the Company
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG 7. CREST members who wish to appoint a proxy or proxies
by utilising the CREST electronic proxy appointment
service may do so by utilising the procedures described
in the CREST Manual on the Euroclear website (www.
euroclear.com/CREST). CREST Personal Members or
other CREST sponsored members and those members
who have appointed a voting service provider(s), should
refer to their CREST sponsor or voting service provider(s),
who will be able to take the appropriate action on their
behalf. In order for a proxy appointment made by means
of CREST to be valid, the appropriate CREST message.(‘a
CREST Proxy Instruction’) must be properly authenticated
in accordance with Euroclear UK & Ireland Limited’s
(EUI) specifications and must contain the information
required for such instructions, as described in the
CREST Manual. The message, regardless of whether it
constitutes the appointment of a proxy or an amendment
to the instruction given to a previously appointed proxy,
must, in order to be valid, be transmitted so as to be
received by the issuer’s agent (ID RA10) by the latest
time(s) for receipt of proxy appointments specified in
the Notice of Meeting. For this purpose, the time of
receipt will be taken to be the time (as determined by
the timestamp applied to the message by the CREST
Applications Host) from which the issuer’s agent is able to
retrieve the message by enquiry to CREST in the manner
prescribed by CREST. The Company may treat as invalid
a CREST Proxy Instruction in the circumstances set out in
regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
as derived from The London Stock Exchange Daily
Official List for the five business days immediately
preceding the day on which such share is contracted
to be purchased;
d. the authority hereby conferred shall expire at the end
of the next Annual General Meeting of the Company
after the passing of this resolution unless previously
renewed, varied or revoked by the Company in
general meeting; and
e. the Company may make a contract to purchase its
Ordinary shares under the authority hereby conferred
prior to the expiry of such authority, which contract
will or may be executed wholly or partly after the
expiry of such authority, and may purchase its
Ordinary shares in pursuance of any such contract.
By Order of the Board
Katie Wood
Company Secretary
26 June 2017
Registered office:
Northgate Centre, Lingfield Way, Darlington, DL1 4PZ.
Notes
1. A member entitled to attend and vote at the Annual
General Meeting (‘the Meeting’) may appoint another
person(s) (who need not be a member of the Company)
to exercise all or any of his rights to attend, speak and
vote at the Meeting. A member can appoint more than
one proxy in relation to the Meeting, provided that each
proxy is appointed to exercise the rights attaching to
different shares held by him.
2. A proxy does not need to be a member of the Company
but must attend the Meeting to represent you. Your
proxy could be the Chairman, another Director of the
Company or another person who has agreed to attend to
represent you. Your proxy must vote as you instruct and
must attend the Meeting for your vote to be counted.
Appointing a proxy does not preclude you from attending
the Meeting and voting in person.
3. A proxy form which may be used to make this
appointment and give proxy instructions accompanies
this notice. Details of how to appoint a proxy are set
out in the notes to the proxy form. As an alternative
to completing a hard copy proxy form, proxies may be
appointed by using the electronic proxy appointment
service in accordance with the procedures set out in Note
6 below. CREST members may appoint proxies using the
CREST electronic proxy appointment service (see Note 7
below). In each case the appointment must be received
by the Company not less than 48 hours, excluding non
business days, before the time of the Meeting.
4. A copy of this notice has been sent for information only
to persons who have been nominated by a member to
enjoy information rights under section 146 of the Act
(‘a Nominated Person’). The rights to appoint a proxy
cannot be exercised by a Nominated Person: they can
only be exercised by the member. However, a Nominated
Person may have a right under an agreement between
him and the member by whom he was nominated to be
appointed as a proxy for the Meeting or to have someone
else so appointed. If a Nominated Person does not have
such a right or does not wish to exercise it, he may have a
right under such an agreement to give instructions to the
member as to the exercise of voting rights.
5. To be entitled to attend and vote, whether in person or
by proxy, at the Meeting, members must be registered
in the register of members of the Company at close of
business on Friday 15 September 2017 or, in the case of
an adjourned meeting, at close of business on the day
which is two days before the meeting (excluding days
which are not working days). Changes to entries on the
register after this time shall be disregarded in determining
the rights of persons to attend or vote (and the number
of votes they may cast) at the Meeting or adjourned
meeting.
6. Shareholders wishing to appoint a proxy online should
visit www.signalshares.com and follow the instructions
on screen. If you have not already registered with The
Share Portal you will need to identify yourself with your
personal Investor Code (see Attendance Card). To be valid
your proxy appointment(s) and instructions should reach
Capita Registrars no later than 48 hours, excluding non
business days, before the time set for the Meeting.
124
125
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWFINANCIALS NOTICE OF ANNUAL GENERAL MEETING CONTINUED
8. A member of the Company which is a corporation may
authorise a person or persons to act as its representative(s)
at the Meeting. In accordance with the provisions of the
Act, each such representative may exercise (on behalf
of the corporation) the same powers as the corporation
could exercise if it were an individual member of the
Company, provided that they do not do so in relation to
the same shares. It is no longer necessary to nominate a
designated corporate representative.
9. Members satisfying the thresholds in section 527 of the
Act can require the Company to publish a statement on
its website setting out any matter relating to (a) the audit
of the Company’s accounts (including the auditor’s report
and the conduct of the audit) that are to be laid before
the Meeting; or (b) any circumstances connected with an
auditor of the Company ceasing to hold office since the
last Annual General Meeting, that the members propose
to raise at the Meeting. The Company cannot require the
members requesting the publication to pay its expenses.
Any statement placed on the website must also be sent
to the Company’s auditor no later than the time it makes
its statement available on the website. The business
which may be dealt with at the Meeting includes any
statement that the Company has been required to publish
on its website.
10. The Company must cause to be answered at the Meeting
any question relating to the business being dealt with
at the Meeting which is put by a member attending the
Meeting, except in certain circumstances, including if
it would interfere unduly with the preparation for the
Meeting or if it is undesirable in the interests of the
Company or the good order of the Meeting that the
question be answered or if to do so would involve the
disclosure of confidential information.
11. As at 27 June 2017 (being the latest practicable date prior
to the publication of this notice), the Company’s issued
share capital consists of 133,232,518 Ordinary shares of
50 pence each, carrying one vote each and 1,000,000
preference shares of 50 pence each, which do not carry
any rights to vote on the above resolutions. Therefore,
the total voting rights in the Company are 133,232,518.
12. The contents of this notice of meeting, details of the
total number of shares in respect of which members are
entitled to exercise voting rights at the Meeting, the total
voting rights that members are entitled to exercise at the
Meeting and, if applicable, any members’ statements,
members’ resolutions or members’ matters of business
received by the Company after the date of this notice
will be available on the Company’s website: www.
northgateplc.com/investors.php.
13. You may not use any electronic address provided in this
notice of meeting to communicate with the Company for
any purposes other than those expressly stated.
14. Under sections 338 and 338A of the Act, members
meeting the threshold requirements in those sections
(i) have the right to require the Company to give, to
members of the Company entitled to receive notice of
the Meeting, notice of a resolution which those members
intend to move (and which may properly be moved)
at the Meeting; and/or (ii) to include in the business to
be dealt with at the Meeting any matter (other than a
proposed resolution) which may properly be included in
the business at the Meeting. A resolution may properly
be moved, or a matter properly included in the business,
unless (a) (in the case of a resolution only) it would,
if passed, be ineffective (whether by reason of any
inconsistency with any enactment or the Company’s
constitution or otherwise); (b) it is defamatory of any
person; or (c) it is frivolous or vexatious. A request made
pursuant to this right may be in hard copy or electronic
form, must identify the resolution of which notice is to be
given or the matter to be included in the business, must
be authenticated by the person(s) making it and must be
received by the Company not later than 8 August 2017,
being the date six clear weeks before the Meeting, and
(in the case of a matter to be included in the business
only) must be accompanied by a statement setting out
the grounds for the request.
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG GLOSSARY Term
ABI
AGM
Definition
Association of British Insurers
Annual General Meeting
Annual
Report on
Remuneration
That section of the Remuneration report which is subject
to an advisory shareholder vote
Term
HMRC
IFRS
ISO
ISS
KPIs
LCV
Definition
Her Majesty’s Revenue & Customs
International Financial Reporting Standards
International Organisation for Standardisation
Institutional Shareholder Services
Key Performance Indicators
Light commercial vehicle: the official term used within
the European Union for a commercial carrier vehicle with
a gross vehicle weight of not more than 3.5 tonnes
Listing Rules
The Listing Rules of the Financial Conduct Authority
MPSP
NBS
Net tangible
assets
Management Performance Share Plan (closed to new
awards from 2013)
New Bridge Street, a trading name of Aon plc
Net assets less goodwill and other intangible assets
Chief Executive Officer
Chief Financial Officer
Consumer Price Index
Corporate Social Responsibility
Deferred Annual Bonus Plan
The Department for Environment,
Food and Rural Affairs
Earnings before interest and taxation
(equivalent to operating profit)
CEO
CFO
CPI
CSR
DABP
DEFRA
EBIT
EBITDA
EPS
EPSP
ESG
ESOS
EU
Facility
headroom
Earnings before interest, taxation, depreciation
and amortisation
Basic earnings per share
Executive Performance Share Plan
Environment, social and governance
Energy Savings Opportunity Scheme
European Union
Calculated as facilities of £571.9m less net borrowings
of £311.9m. Net borrowings represent net debt of
£309.9m excluding unamortised arrangement fees of
£2.0m and are stated after the deduction of £41.2m
of cash balances which are available to offset against
borrowings.
NPS
PBT
PPU
PwC
ROCE
SIP
Net promoter score: a standardised measure of customer
satisfaction
Underlying profit before tax
Profit per unit/loss per unit – this is a non-GAAP measure
used to describe the adjustment in the depreciation
charge made in the year for vehicles sold at an amount
different to their net book value at the date of sale (net
of attributable selling costs), divided by the number of
vehicles sold
PricewaterhouseCoopers LLP
Underlying return on capital employed: calculated
as underlying operating profit (see non-GAAP
reconciliation) divided by average capital employed
The Company’s HMRC approved share incentive plan,
also known as the All Employee Share Scheme
FCA
Financial Conduct Authority
Free cash flow Net cash generated before the payment of dividends
SMEs
Small and medium sized enterprises
FY2016
FY2017
FY2018
GAAP
Gearing
The year ended 30 April 2016
The year ended 30 April 2017
The year ending 30 April 2018
Generally Accepted Accounting Practice:
meaning compliance with International
Financial Reporting Standards
Calculated as net debt divided by net tangible assets
(as defined below)
GHG
Greenhouse Gas
The Code
The UK Corporate Governance Code
The Company Northgate plc
The Group
The Company and its subsidiaries
TSR
Utilisation
Total Shareholder Return
Calculated as the average number of vehicles on hire
divided by average rentable fleet in any period
126
127
25361.02 13-6-17 Proof FourNorthgate plc Annual Report and Accounts for the year ended 30 April 2017REVIEWFINANCIALS SHAREHOLDER
INFORMATION
Classification
Information concerning day-to-day movements in the price of the Company’s Ordinary shares can be found on the
Company’s website at:
www.northgateplc.com
The Company’s listing symbol on the London Stock Exchange is NTG.
The Company’s joint corporate brokers are Barclays Bank plc and Numis Securities Limited and the Company’s Ordinary shares
are traded on SETSmm.
Financial calendar
December
Publication of interim statement
January
Payment of interim dividend
June
Announcement of year end results
July
Report and accounts posted to shareholders
September
Annual General Meeting
Payment of final dividend
Secretary and registered office
Katie Wood
Northgate Centre
Lingfield Way
Darlington
DL1 4PZ
Tel: 01325 467558
Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Tel: 0871 664 0300
(calls cost 10p per minute plus network extras)
Overseas: (+44) 208 639 3399
25361.02 13-6-17 Proof FourNorthgateplc.com stock code: NTG 25361.02 13-6-17 Proof Four Northgate plc
Northgate Centre, Lingfield Way
Darlington, DL1 4PZ
Tel
01325 467558
Web
www.northgateplc.com
25361.02 13-6-17 Proof Four